Consumer activism is a pretty turnkey way to make your voice heard, whether by buying from brands you believe in or boycotting ones you don’t.
But what about ethical investing?
Investing in companies that align with your values is a bit more complicated, but it’s possible — and there are many financial expert-approved ways to do it.
85%
The percentage of individual U.S. investors interested in sustainable investing. Among Millennials, the number is even greater at 95%
Morgan Stanley Institute for Sustainable Investing
According to Nate Hoskin, CIO of Hoskin Capital and a certified financial planner (CFP), you should only consider investing after creating an emergency fund — at least 3-4 months of expenses saved in a high yield savings account.
Before you get started, brush up on the basics of investing, and take a few key steps:
- Decide if you’d like to work with a broker or go the robo-advisor route.
- Consider how much of a risk you’re willing to take when investing. If you’re looking for a low-risk approach, micro-investing may be right for you.
- Consider the different types of investments you can make, like individual stocks and mutual funds.
- What is the company’s mission statement?
- Does this company treat its workforce fairly?
- How are the company’s profits being used?
- Is the company living up to its sustainability pledges?
- Do they have any political affiliations?
You can also look for
ESG (environmental, social, and governance) ratings,
which provide a good indicator of companies’ social responsibility. There is no formal score, but companies such as MSCI, Sustainalytics, and RepRisk use factors such as carbon emissions and board diversity for ratings. But it’s important to note that having an ESG label doesn’t mean a company is perfect, and you should always do your research.
But is ethical investing financially sound?
According to NerdWallet, sustainable funds have been shown to do as well or better than traditional ones. In the first quarter of 2020, 24 of 26 ESG index funds outperformed similar conventional funds.
If you’re considering investing in a company, start gathering current info. “Sometimes these stories can be positive regarding values that investors care about,” says L.J. Jones, a financial planner and founder of Developing Financial LLC. “Other times, it can inform an investor that a company they are invested in made a decision that might run counter to the investor's values.”
If you care about specific causes, such as breast cancer research or LGBTQ rights, Stanley suggests searching for companies that devote a part of their profits to these endeavors.