You may have heard about ethical investment funding approaches and how they can benefit investors and society. While one can approach ethical investing in different ways, relying on supports like ETFs can safeguard your investment and boost its potential for the future. By choosing funds that prioritize sustainability, you can pursue investments that provide public benefit for sustained periods.
It is crucial to understand that not all ETFs are the same. Some serve a narrow focus, while others address multiple sustainability factors. The right ETF for you will ultimately come down to your investment goals and personal values.
Here, we discuss what investors like you need to know about sustainable ETFs so that you can make the best choice for your investments. Finding the sustainable ETFs that are most effective requires the ability to differentiate one type of ETF from another. Read on to learn how to do just that.
Definition Of (ETF) Exchange-Traded Fund
Let’s start with the basics: What’s an ETF? An ETF is an abbreviated term for exchange-traded funds. An exchange-traded fund intends to support an ethical investment whereby the positive contributions to society outweigh the amount of harm contributed.
Additionally, sometimes ETFs need to be investigated to ensure that the integrity of honoring sustainability is genuine. The goal is to determine for a fact whether the “sustainable” ETFs reviewed can be considered sustainable. Take your time reviewing this information and get insight from professionals when possible.
What Are Benefit Corporation ETFs
Benefit Corporation funds aim to make investors money and create a significant and positive societal benefit. The focus is on maximizing the positive contributions to all involved. Benefit Corporation ETFs want to live by the idea that everyone wins. There is no escaping that harm is not entirely avoidable with any business, but remaining mindful of the approaches used can significantly improve the decisions that ethical investors choose to make.
Is Sustainability Clearly Defined?
You might also wonder whether sustainable funds are ethical or if the concept is too vague to define. While the word sustainability applies to many different things, ethical investors consider sustainability under the context of The Golden Rule, or to treat others the way you wish to be treated and, most of all, to do no harm. While an ethical investor may utilize this as their moral compass, sustainable ETFs do not always follow all factors of sustainability closely.
Single-Theme ETFs Explained
For example, Single-Theme ETFs, or single-theme funds, focus on specific concerns and may not consider all variables influencing investment decisions. There are often overlooked factors that negatively contribute to the world, removing the ethical status from certain ETFs that were misinterpreted as sustainable ETFs. It is essential to work with a firm that understands how to determine sustainable and ethical investments, even when a fund seems ethical.
Moreover, sustainability can also be viewed solely as the sustainability of focused causes. Those concerned only with said causes may not acknowledge the negative contributions that are associated with the single-theme ETF. Someone else might view the investment as unethical because they might focus on the factors that the ETF may not address.
Understand What’s At Stake
Before making final decisions on whether to pursue any investment or sustainable ETF, it is essential to understand the sustainability factors involved and the costs and benefits of the potential investment to society, the environment, and the world. It is wise to review sustainable ETFs with the help of an experienced, ethical investment firm.
Consider Working With An Experienced General Investor Firm
Working with a firm allows you to consider sustainable ETFs strategically so as to not overlook essential aspects influencing your final decision. Quantification allows ethical investors to form measurable insights on the factors they’re considering to ultimately determine a numerical value that informs them of the degree of benefit vs. harm that a company’s actions and that the investment will have on society.
Your Investment Profile Can Help You Consider Sustainable ETFs
Create an investment portfolio to refer to when considering investments and ruling out companies that do not apply. The portfolio may also be reviewed by a firm you trust to help you make investment decisions. An investor portfolio also allows you to take note of companies that need to improve. You may encourage improvements by informing companies of what’s at stake and where they fall within your portfolio. If the company can make improvements that would qualify them to rank higher on your list, tell them of this to encourage positive changes in how they conduct business.
Don’t Exclude Standard Approaches Entirely
As an investor looking into sustainable ETFs, you want to make money from the companies you invest in. While ethical investing does require more thought and analysis than whether you’ll profit, that does not mean you need to exclude standard approaches to investing entirely. It is still essential to analyze the fees and any financial risks associated with working with any company. Furthermore, assess the prospectus of standard ETFs and sustainable ETFs you’re considering getting involved in to ensure your money is in good hands and that applicable fees are outlined and reasonable based on what’s involved.
Be Mindful Of ESG Funds And Degree Of Sustainability
Be mindful of how you approach ESG funds, which are not always as ethical as investors may hope for them to be. For example, ESG funds focus on the support of one or more sustainability factors (environmental, social, or governance-related). Still, the level to which these are carried out, and other factors are not addressed, is not enforced. As with all investment opportunities, you want to learn precisely what is involved before you assume that sustainable ETFs and ESG funds are ethical.
Follow The Golden Rule And Get Your Facts Straight
Sustainability is a vague term, but as an ethical investor, you consider it through the lens of The Golden Rule. Ensure that the investments and sustainable ETFs you consider are also focused on contributing the least harm and the most benefit to society.