Ethical investing
06/24/2021 Terry Inskip 3 min read
What happens to investing when people start caring?
As part of OAS FCU's commitment to the United Nation's Sustainable Development Goals, we wanted to bring to your attention the many kinds of investments that you can make that can not only provide you a nice return, but also make a noticeable positive change on society and/or the environment.
The origin of (ethical) investing
Fifty years ago, investing was an activity that required big capital and the guts to take risks. Then, mutual funds, stock options, and 401(k) personalized investing changed that. They taught consumers that investing, while risky, is still a personally manageable –and even very profitable- endeavor.In the past 20 years, we have seen the rise of awareness of climate change, mono-cultivation risks, the emergence of sustainable energies, and a growing global social awareness and willfulness to steward our planet for future generations. It is no surprise that these interests and trickled down into our investments. Ethical investing allows us to invest in initiatives that are good for the environment and society at large.
There are three main types of green investments: Impact Investing, Socially Responsible Investing and, Environment, Social and Governance Investing.
Impact Investing (II)
This type of investment aims to provide consumers with a return while using our funds to create a specific positive social impact. They are both investment funds, and bonds.- The first impact funds were Pax World Funds and First Spectrum Fund. They invested in non-war related, socially responsible, civil rights respectful, and environmentally sound businesses.
- The UK launched the first social investment bond in 2010. Since then, this type of government bond has extended to 25 other countries.
Socially Responsible Investing (SRI)
This type of investing takes the approach of providing capital to companies that are responsible towards society and the planet. There are several kinds of SRIs:- Government-controlled funds. Countries like Japan, Sweden and Canada invest their social security funds to help support their aging populations retirements. Others, like Norway, invest in highly environmentally-sound investments to offset their own carbon footprints.
- Mutual Funds. According to the 2020 Forum for Sustainable and Responsible Investment, one-third of managed funds in the US were invested using sustainable investing strategies. That amounted to $17.1 trillion by the end of 2019.
- Community investments. They put money to work at the local level for good social causes: education, healthcare, public housing, drug rehabilitation, etc. This is the most direct community-specific help investing.
Environment, Social and Governance Investing
This is the most focused type of green investments. It examines the practices of prospective businesses in which to invest; they pay attention to their environmental, social and governance practices to consider how they might perform in the future. They evaluate:- Environmental stance. The pollution they generate, waste production, climate change and sustainability work, animal welfare, energy consumption and natural resource preservation.
- Social profile. Human rights, child or forced labor, health and safety, employee relations, stakeholder relations and community engagement.
- Governance profile. Board independence, management quality, executive compensation, conflicts of interest, disclosure and transparency, and shareholder rights.
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