Ethical investing has seen an increase in popularity in recent years. This may be due to an increasing focus on social responsibility and the impact investment choices might have on the environment, as well as on sustainable economic development and lifestyles.
How does ethical investing work?
Often, ethical and sustainable investments are screened, either by an exclusionary or an inclusionary method. Exclusionary refers to picking and getting rid of the unethical or unsustainable investments in order to focus on those that are more likely to conform with ethical principles. Inclusionary screening refers to actively selecting companies that use ethical or sustainable practices.
What are the statistics?
According to a biennial report released by the Global Sustainable Investment Association, ethical assets had grown by 25% in 2016. This shows that more people are considering these investments, and many businesses are following suit by incorporating more ethically-focused practices into the way they are run.
Why is ethical investing experiencing an increase in popularity?
Investments are seeing a trend that focuses on the long term, thanks to changing priorities and principles in the world. Rather than just avoiding industries like tobacco, weapons and alcohol, investors are focusing more on sustainability and the financial implications of many investments.
For example, as renewable energy and climate change becomes more of an issue, many investors may be more aware of the long-term implications of investing in non-renewable energy sources such as fossil fuels. As this is likely to be linked with ethical implications of investments, this shows a positive trend in the number of investors opting for ethical investments in recent years.
It may also be considered that younger investors are more likely to opt for ethical investments. According to the Schroders Global Investor Study 2017, 86% of 18-35-year olds noted that sustainable investments were important to them, compared to 67% of 51-69-year olds. This may mean that as more and more young people enter the world of investing, the focus on ethical and sustainable companies is likely to increase.
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