Building wealth in your 40s can be one of the most lucrative times. Most people…
Ethical investing in Australia faces quite a bit of doubt. According to a survey by Rask, half of the investors (50%) have said they’re interested in sustainable and ethical investing. However, they also said that the differences between the two were essentially unknown.
40% of investors, on the other hand, were able to differentiate between sustainable and ethical investing. However, they could not give themselves a “great” rating despite their knowledge of the topic. There’s also been research that showed nearly all (around 90%) of Australians want their super to end up investing responsibly.
Read on to learn more about the common myths surrounding ethical investing and the truth behind them.
Myth #1: Ethical Investing Will End up Costing Returns
That’s just plain wrong. Certain super funds, ETF providers, or managed funds have an extra charge for an “ethical” overlay (-0.5 instead of 0.25%, for example). Well over 1 trillion dollars have been invested in ESG initiatives, Morningstar data says.
Global quant investment firm AQR reported that, on average, companies with more social responsibility (CSR) have higher shareholder returns than companies with less CSR. The RIAA, which ranks companies on their social responsibility, found that funds committed to responsible investments outperformed their non-responsible peers across 3, 5, and 10 year periods.
Yes, even bond markets having a filter for ESG is helpful. Market downturns have “green bonds” with lower spreads. However, the yields are a little bit lower.
Myth #2: Ethical Investing Has No Actual Impact
Switching to a “balanced impact” or “renewables focused” super fund has a significant impact on ethical and environmental issues. According to Future Super, a person who has a super balance of $38,000 can save you as much as 6.64 carbon tonnes should you invest in a particularly high impact strategy.
If you need an analogy, a net-zero carbon super fund (which also advocates for renewable energy investments at 20%) equates to you and 27 neighbours hang-drying clothes instead of using a dryer for a whole year.
Myth #3: Ethical Investing Is a “One Size Fits All” Approach
There are varying kinds of sustainable or ethical investing. The differences are as follows:
- Ethical investing is all about internal values; it’s very personal. Another way of looking at it is as an internal compass.
- Sustainable, socially aware investing is about filters and rules being used to “avoid doing bad.” In contrast to the abovementioned, it’s the external compass.
Suppose you want to learn more about investing using your values. In that case, you can select stocks from companies that pass your ethical standards, study your investment fund, ask the managers about their investment strategy or invest in an ETF with an environmentally sustainable focus. You can do all of these things on a single website.
Ethical investing is something that many people are on the fence about. Popular myths include it being one size fits all or costing returns. It’s crucial to debunk these misconceptions and learn the truth behind them to grow your wealth while making a positive impact on social and environmental issues.
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