Tips to make sure your investments are ethical

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Ethical investing is taking off in Australia and investors have more options than ever before.

Funds labelled ‘ethical’ or ‘responsible’ have more than quadrupled in size over the past three years, according to the Responsible Investment Association Australasia (RIAA). Here are some ways to make sure your investments are ethical:

1. Find a provider with similar goals

As sustainable investing is becoming more popular, fund managers and investment product providers are releasing new products to attract this new type of investor, even if they have never produced anything for the ethical investing space before.

2. Search for the ‘sin threshold’

As an investor you can decide what your own tolerance is for ‘sin’ revenue, and put your money in line with your ethics.

James Tayler of Morphic Asset Management encourages investors to ask direct questions about possible indirect investments or revenue streams that could bring about an ethical conflict.

“Ask for the documentation. Read their responsible investment policy if they have one, which they should do.”

3. Look for product certification

Tayler also encourages private investors to look for products that are certified.

The RIAA, the peak industry body for responsible investing, provides certifications to guide investors.

4. Ask fund managers to disclose their PRI rating

If you are looking more globally, the UN-backed Principles for Responsible Investments organisation gives fund managers a rating in order to increase transparency.

5. Don’t fall for all the good news

Coca-Cola Amatil announced that they will no longer be distributing and selling single-use plastic and straws in Australia.

Tayler makes the point that Australia is a reasonably small part of Coke’s global business, and investors should look beyond the headlines.

6. Start small and diversify

Just because you are investing sustainably does not mean you are investing without risk.

The rules about starting small and slowly in order to grow and diversify over time still apply.