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/

 

 

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