We already know we should be investing—for the sake of retirement and financial stability—but you might feel conflicted about how you’re investing. For instance, if one of your top values is tackling climate change, you might feel at odds with investing in big oil or exploitative tech companies. We get it! Here’s where ethical investing might be helpful: you can learn about and invest in companies that espouse your values. Let’s explore.
Depending on the ways that you’ve decided to invest—through your 401K at work, brokerage accounts like Robinhood, or ETFs—you can have total, partial, or minimal control over where your investments lie. Ideally, if you’re concerned about funding ethical business, you have access to where your investments are currently funneled. If not—for instance, the investment is through your employer—you can inquire to see where your money is headed.
There are different factors that guide ethical investing, like social responsibility or environmental return. You can find a full list of these factors here. Before deciding you want to be involved with ethical investing, you should conduct a values audit. Where are your priorities? Do your values directly contradict with the business models/profit generation of some companies? What business or companies actually reflect your priorities, values, and beliefs? We recommend writing your answers to these questions down!
Ethical investing is a facet of activism, so by deciding where you invest (and reap the benefits) of your money, corporations are forced to reckon with your choices. For instance, if a significant number of people are pulling out their investments in Shein or AliExpress, then a.) these companies lose money and influence; b.) they can gauge consumer feelings about their practices and products; and c.) these companies can be monetarily persuaded into changing their practices. Sounds like a win-win-win to us.
Do your research! For me, I’m especially wary of companies that “greenwash,” which is using marketing to make it seem like their practices are environmentally-conscious. So, before I invest, I’ll do a deep-dive on their business practices. If they say they plant trees for every purchase or offset their carbon footprint, I’ll look into the operationalization of that. Where do they plant trees? Are they sourcing their trees and labor ethically? How do they actually offset their carbon? If I can’t find the answers to these questions, then I’ll assume the company is greenwashing. I encourage you to ask the same kinds of questions about the companies you’re investing in! If you’re more passionate about social justice and equity, you can develop a similar framework to the greenwashing questions. For instance: if a company says they’re committed to uplifting traditionally marginalized voices, investigate their leadership. Look at where and how they’re choosing to spend money and advertise. This kind of research isn’t easy, and often requires you to read between the lines.
Once you’ve established both your own priorities and the kinds of companies you want to support, you can start making changes, like:
Some of the potential downsides of ethical investing are lower returns and higher management fees. Because it’s still a somewhat niche realm, ethical investing can be riskier than traditional investing. However, in recent years, some ethical investments actually yielded a higher return than traditional investments (in the form of ETFs), so the future of ethical investments is exceptionally promising. Plus, you’ll be putting pressure on business models and corporations that have never faced any consequences for their actions. Let’s funnel our money into our priorities, all while cashing in on significant returns. You’ll be proudly participating in a wave of new-age (and profitable!) activism.
