When it comes to ethical investing, there is no one-size-fits-all solution. What might be considered an ethical investment for one person may not be for another. Many products claim to be ‘ethical’, ‘sustainable’, or ‘green’, but it’s important to do your own research to understand the ethical credentials of each investment before committing any funds. Here’s a quick overview of some of the most common ways to invest ethically in Australia.
Effective Tips to Help You Invest Ethically in Australia
1 - Managed Funds and ETFs
Most Australians are aware of managed funds and exchange-traded funds (ETFs), which are popular investment vehicles due to their flexibility, liquidity and access to a wide range of assets.
One benefit of managed funds and ETFs is that they can allow investors to invest ethically on a global level, including countries and sectors that may be excluded from an investor’s portfolio.
Managed funds offer an easy-to-use and flexible portfolio of investments, which may include a global, ethical component.
ETFs may help you invest ethically in specific asset classes, such as clean energy or sustainable food and water.
Some managed funds and ETFs specifically target ethical, sustainable and/or environmentally responsible investments.
2 - Bonds
Bonds offer a diverse range of benefits, including providing income, helping investors to diversify their portfolios, and increasing an investor’s exposure to risk over longer periods.
Green Bonds are a type of bond that is used to finance environmentally sustainable infrastructure.
Ethical bonds may focus on funding ethical businesses, low-carbon projects, or projects that support the elimination of poverty or social deprivation.
Some bonds are linked to indices that are based on industry sectors, such as sustainable resources, or industry groups, such as environmentally responsible producers.
3 - Real Assets
Investing in real assets refers to investing in real property, agricultural land, commodities, and infrastructure, as well as physical assets such as machinery, tools, and equipment.
Owning a property could be considered an ethical investment if it is rented to tenants or if the property provides accommodation for the owner, their family, or their employees.
Investing in agricultural land and property may be an ethical choice if the land is managed sustainably.
Commodities are the raw materials that are used in the process of making products, such as iron and steel, oil, or natural gas. Investing in commodities may be an ethical choice if the raw materials are sourced from ethically managed mines.
Investing in infrastructures, such as roads and bridges, can be an ethical choice if the project is environmentally sound and provides a long-term benefit to the community.
4 - Responsible Savings
Some of the most popular types of savings products, including cash accounts, term deposits and fixed interest accounts, have ethical components.
Some banks may even have specific ethical savings accounts and term deposits.
Savings accounts and term deposits may be offered at an interest rate above the standard market rate, providing investors with higher income.
Some savings accounts and term deposits may come with ‘ethical’ or ‘responsible’ branding.
Investing ethically can be a great way to ensure that your investments are contributing to positive outcomes for people, businesses, and the environment. There are many ways to invest ethically, from real estate to ethical savings accounts.
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