How soloists can invest their money more ethically
Ever considered the impact your personal, business or super investments have on the earth or how you can leverage ethical investments to help your bottom line? Now might be a good time!
If you’re running an SME, particularly if you’re a soloist, the last thing on your mind is likely whether your suppliers use child labour to manufacture their products or whether your super fund has shares in a weapons manufacturer. Nothing to do with us, right? We’re just trying to turn a profit.
Well, actually, it has a lot to do with you, me, and every other business owner.
I’ve come to realise over the past few months that ethical investing is becoming a big part of the financial landscape, and who we invest in and do business with can ultimately affect both a personal and a business bottom line.
What is ethical investing?
Ethical or ‘responsible’ investing is where an investor chooses to act in an environmentally and socially responsible way, while still seeking a positive financial outcome. According to a report by the Responsible Investment Association Australasia (RIAA), almost half of Australia’s investments last year were ethical investments – and that figure is growing every year.
"Ethically responsible investments can still provide competitive returns and will improve your company’s environmental credentials."
But, how does it affect my business?
If you’re self-employed, you may have an investment portfolio to make your profits work as hard as possible for you. And even if you don’t have a lot of surplus money to invest, you will almost certainly have a superannuation fund you contribute to. And that’s one area where ethical investing is booming.
Ethical funds (Australian Ethical Investments (AEI) is one example) can steer you towards responsible super investments like clean energy and sustainable products, and away from non-ethical ones like polluters, exploiters and environmental vandals.
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Ethically responsible investments can still provide competitive returns, with the added bonus that they make you feel good and will improve your company’s environmental credentials (something that’s becoming more important every day).
And the flipside is, those companies that don’t behave ‘responsibly’ can actually damage their brand. Take the recent revelation that Woolworths and Coles are now the largest owners of poker machines in Australia, with over 15,000 machines between them. Not a good look for our supermarket giants, and a move that has seen AEI remove Woolworths from its responsible investment options.
So how can we incorporate ethical choices into our business finance strategy?
Shares are one way you can make responsible choices and you don’t need to be an expert in ethical investments. The RIAA provides a rating system which lists ASX companies as either green (committed to sustainability), white (moving in the right direction) or black (using unsustainable or unethical business practices). Many investment firms also provide filters that will screen out undesirable industries, products or brands from your investment portfolio.
As mentioned, superannuation is another way and choosing an ethical super fund can be good for both your reputation in the industry and – if you end up taking on employees – for attracting and retaining the right staff. Other ethical choices you can make in your business include favouring suppliers with good ethical credentials and adopting energy-efficient practices into your day-to-day operations; everything from investing in energy-efficient plant and equipment to turning off office equipment when not in use.
Do I ‘walk the talk’?
You’re probably wondering if I practice what I preach in my own business and the answer is yes. My business tries to make ethical financial choices wherever we can, and our employees enjoy access to a super fund with good ethical credentials. We don’t claim to be changing the world, but I believe every little bit counts and it makes good business sense to be on the winning side as the balance continues to shift away from unethical business practices.