Ethical investing is becoming increasingly popular as investors seek to make a positive impact on the world. And with the rise of stock trading platforms like Robinhood, which have a little-to-no barrier to entry, anyone can invest in companies that strive to do good with their employees, society, and the environment. However, becoming a good ethical investor takes work and time to ensure you are putting your money into companies that will not only reward your investment but that are actually ethical.
The reality is that not all ethical and moral companies actually meet the criteria. In this article, we will discuss how experienced, ethical investors quantify the impact of their investments by determining their values, avoiding ESG companies, and prioritizing benefit corporations.
Determine Your Ethical Values
The first step in ethical investing is to determine your personal values and beliefs so you can find like-minded companies to invest in. No two investors’ ethical beliefs will ever be the same, making it hard to find a formula for quantifying a company’s impact that is universally agreed upon. A good starting point is a golden rule. A principle that states we should treat others the way we would want to be treated. If we apply this to ethical and moral companies, investors can prioritize companies who treat their employees and the environment well and should be rewarded for that.
ESG Companies Vs. B Corps
Two common terms you will hear when starting to become an ethical investor are ESG companies and benefit corporations (B Corps), and while on the surface, they may seem very similar, there are some key differences you need to know.
Environmental, social, and governance (ESG) analysis is one of the most popular ways that investors quantify the impact of ethical and moral companies. ESG analysis looks at how a company performs on key environmental, social, and governance issues and how these factors may impact the company’s financial performance. However, ethical investors must conduct thorough research before investing in ESG-focused ethical and moral companies because they are often not as ethical as they purport to be.
This is because different organizations have different definitions of ESG companies. The lack of standardization allows some companies to claim to be concerned about ESG issues while still prioritizing maxim profits over creating a positive impact.
The purpose of a B Corp is to create a positive impact on society and the environment. B Corps are committed to using business as a force for good and are legally required to consider the impact of their decisions on all stakeholders, including employees, customers, suppliers, and the environment. This legal requirement is much more stringent than ESG ethical and moral companies. Enabling ethical investors to better quantify the impact of their investments.
Becoming An Ethical Investor Is Worth It
Ethical investing has increasingly proven to be one of the smartest investment strategies. Ethical and moral companies that prioritize sustainability as much as they do their profits are, by their very nature, safer long-term investments. As they are constantly considering the long-term future in any business decision.