The spotlight on responsible investing has been shining for some time and the current Covid-19 crisis is likely to increase interest. Environmental, social and governance (ESG), socially responsible investing, impact investing, values-based investing, impact investing, ethical investing. Whatever you refer to it as, it’s gathering momentum and it’s not going away.
Our research shows that over 25% of employees would or already do invest in ethical companies that have a positive impact on the world .
In a nutshell ESG is about making investment decisions that consider environmental, social and governance factors. A fund manager will look at things like the company’s carbon emissions, labour standards and lobbying activity for example, when choosing whether to invest in this company as part of their fund offering.
Funds can also be defined as ‘ethical’ through positive or negative screening or both. A positive screening approach means seeking out companies to invest in that actively make a positive contribution to society and the environment. Negative screening means they’ll exclude funds based on specific criteria e.g. they might choose not to invest in ‘sin’ sectors such as oil, tobacco or gaming.
Other types of ethical investing include:
Our Ethical SmarterMix portfolios makes it easy to invest ethically without you needing to pick and manage funds yourself. There are 4 different portfolios to choose from ranging from low risk/return to very high risk/return.
Each portfolio is designed to maximise diversification and find the highest projected return for your chosen risk level and of course all of the underlying funds have all been screened by an ethical investing framework and are deemed ‘ethical’ by the fund manager. You can also go into each fund factsheet to see exactly where they’re being invested, so you know you’re investing in line with what’s important to you.
If you’d rather build your own portfolio of funds, you can use our comparison tables and set the filter to ethical funds only.
Some investors are concerned that investing ethically could lead to lower returns than alternative investment options. But this isn’t necessarily true.
There's an argument that companies that behave in a more sustainable manner are likely to have a better future and therefore perform better in the long run.
The best thing is that with Smarterly, you can view the projected ethical fund and portfolio performance with our risk wizard – just like the rest of the funds and portfolios – so you can compare funds and make an informed decision on how you want to invest.
We’ve recently signed up to the UN-backed Principles for Responsible Investment (PRI), which is quickly becoming the kitemark for responsible investment. The more we enable people to invest responsibly, the better everything will be in the long run!
If you’re interested in our Ethical SmarterMix, please log into your account.While Smarterly can give you plenty of information about the options available to you, we’re not able to give financial advice. Capital is at risk and the value of investments can go down as well as up. Sources
 Realigning the workplace savings offering to meet the needs of millennials, Smarterly, 2019