Welcome to Finance & Fury, the ‘Say What Wednesday’ edition, where every week we tackle questions from you guys. This week the question comes from Jason;
“My question is about investing with an Environmental, Social and Governance (ESG) / Ethical investment focus.
Given their increasing popularity, do these types of investments have the potential to make the world a better place?
Historically how have ESG/ethical investments performed in Australia relative to the market and what factors should be considered before investing in this space?”
Today we discuss;
What are Ethical Investments, and how do they work? Inclusionary v exclusionary managed funds; what types of companies are excluded when making their investment decisions, and what types of companies are included? The difference between ‘Supporting’ and ‘Forcing’ when it comes to the way managed funds impact the underlying investment companies’ practices and what this might mean for you as an investor. What to consider when buying these types of investments. Do they actually meet your definition of ethical? You’d be surprised at some of the companies that are actually ‘recognised as a responsible and ethical investment option’ How diversified are you? The performance of these (like all ETFs/managed funds) depends on the underlying performance of the companies that they buy. How have ethical investments performed for the past 12 months? Over the long term? The impact of thematic trends Historical returns
We talk about how these types of investments have the potential to make the world a better place, but the pros and cons are not what you might think.
Supply drives demand Investment losses due to trying to change companies ‘for the better’
https://www.canstar.com.au/investor-hub/10-top-ethical-investment-funds/
