Attitudes to ethical investing are changing rapidly with millennials leading the charge and they are also influencing their parents to do the same.
Ethical investing is a personal preference and most investors choose to screen out certain industries entirely, such as companies that produce coal, weapons, tobacco, or those that exploit workers.
Along with avoiding certain companies, other investors concentrate on allocating capital to causes they especially care about.
For example an investor may feel strongly about sustainable products and recycling and look for companies or funds that concentrate on these areas.
The Responsible Investment Association Australia conducted a survey in November that investigated investors' attitudes to ethical investing.
The report found that 9 in 10 Australians expect their superannuation or other investments to be invested responsibly and ethically. 53% of Australians will consider making ethical or responsible investments in the next 1 to 5 years.
Millennials are the segment of investors driving the ethical investment trend and 7 in 10 would rather invest ethically, than in a fund that only cares about returns. This is not a trend just among more wealthy investors as you may think either.
Finding companies to invest in takes enough time already and adding an ethical screen to the mix makes it more so. To make it easier for investors, there are a number of funds and ETFs to offer a diversified option.
The largest and most well known managed investment scheme, Australian Ethical Investment Limited (ASX: AEF), has been around since 1986, but has really taken off since around July 2010, when new CEO Phil Vernon was appointed, and is up 636.15% in the last five years.
You can either buy directly into the different fund options or invest in the overall business by buying the company on the ASX.
There are several ethical investment ETFs listed on the ASX, which have gone well in the last couple of months, such as the BETASHARES GBL SUSTAINABILTY ETF (ASX: ETHI), which tracks the performance of the Nasdaq Future Global Sustainability Leaders Index and was listed in January this year, returning 19%.
A new ASX ETF, the BetaShares Australian Sustainability Leaders ETF (ASX: FAIR) was added to the ASX on 29 November, which gives investors access to a portfolio of ethical Australian companies.
Most of the ethical ETF offerings are from UBS, who have several options that aim to replicate an index, but screen companies that do not adhere to certain ethical criteria.
Ethical investing is gaining traction and is here to stay, especially as millennials have a different way of looking at investing that is starting to influence their parents.
While there is still not a huge amount of information out there on individual companies and their ethical and sustainable practises, there are certainly an increasing number and variety of vehicles for investing consciously.
