What is ethical investing and why should you consider it?

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While we look to make sustainable choices in our lives- whether that’s through shopping at independent retailers, using less plastic, or opting for a green energy provider- we are ultimately looking to make a difference to the world for future generations.

Sustainability and ethics doesn’t just stop at your front door, though. Although there is lots we can do to live a greener lifestyle at home, we can also make a bigger impact through our investment choices.

We all have a choice about what we do with our money, and where we spend it. We have the power and the responsibility to make purchases that align with our values. This is where ethical investing can come into play.

What is ethical investing?

Ethical investing is a strategy used for doing good with your money. Typically, you will be investing in a way that aligns with your social, environmental, moral and even religious values. With the increase of conscious investors, you can now invest in dedicated ethical funds, which are essentially a collection of ethical investments.

You can feel good, and feel better connected to your investments when you know that you are supporting companies who are aiming to make a positive change in the world.

What are the ethical issues associated with investing in stocks?

Depending on your own ethical outlook, when you invest in stocks, there is a chance that you could be investing in companies which are not deemed ‘ethical.’ For example, companies involved in tobacco, alcohol, gambling or weapons.

You may also wish to avoid companies who do not have social and environmental responsibility on the top of their agenda.

These issues, among others, are used as screening criteria – when investing in an ethical fund, you can be assured that the companies you are investing in are screened and then determined to be ethically sound.

What does ESG mean?

ESG is an acronym which stands for Environmental, Social, and Governance. ESG aims to identify companies who are striving to do good in the world. It is a gauge used to determine how ethical a particular investment choice might be. ESG is assessed by a third party provider (of which there are several) and a report and rating is produced.

For example, a company might be reviewed on how much waste they produce, whether it produces transparent reporting to the public and how diverse its workforce is, among lots of other things!

When fund managers assess companies to determine their eligibility, ESG gives them a framework to work against. Companies are then regularly monitored to ensure that their ESG score is maintained.

How can you invest ethically with Wealthify?

You can invest ethically with Wealthify by investing in one of their five Ethical Plans that allow you to invest ethically. The Ethical Plans from Wealthify can contain up to 25 investment funds, all of which enable you to invest in organisations committed to having a positive impact on society and the environment.

The Ethical Plans at Wealthify aim to exclude ‘sin stocks’: gambling, adult entertainment, weapons, and tobacco. But the list isn’t just limited to these four sectors and some funds will consider a wider range of activities, such as intensive farming and nuclear power.

When you invest with Wealthify, you can benefit from actively managed ethical investments. The fund managers do all of the hard work so that you don’t have to do all the research yourself! With actively managed funds, there’ll be a fund manager picking companies and constantly monitoring what they are doing. This is to ensure companies are maintaining their high ethical standards or implementing the right policies to improve their ESG rating. If a company lets its ESG rating slip, fund managers will remove it from the pool.

The tax treatment depends on your individual circumstances and may be subject to change in the future.

Past performance is not a reliable indicator of future results.

Please remember the value of your investments can go down as well as up, and you could get back less than invested.

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