Different approaches to responsible investment
Responsible investment products (for example managed funds or superannuation funds) differ from each other in the way in which they take environmental, social, ethical or governance issues into account. Typically, they’ll be managed using one of the following methods:
The most common approach to responsible investment where the investor avoids certain industries such as armaments, gambling or tobacco, but will invest in everything else.
The investor seeks out companies that have a positive impact on society and the environment, such as a company that specialises in providing a renewable energy source.
Best of sector
The investor doesn’t screen out any particular industry but looks for companies considered to be the most socially and environmentally responsible in that sector.
Responsible investments are sometimes referred to as being ‘light green’ or ‘dark green’ with the latter applying the strictest screening criteria to their investment portfolio.
What are the issues that are important to you?
Before you invest, you’ll need to clarify which issues are important to you (if it’s not clear already). Check out the links below if you’d like to explore further.
Forestry, Mining, Nuclear Power
Next, you’ll need to apply your own ‘screen’ to different investments (whether they be managed funds, superannuation funds or direct shares) based on your ethical profile. For example, if you’re concerned about climate change and the state of the environment you’re probably not going to want to invest in a mining company such as BHP Billiton.
How do you find out which companies a fund manager invests in? Start by having a look on their website, or order a prospectus. If it’s still not clear, send them an email and ask directly.
Finding a Financial Adviser
If you’re after a financial adviser in your part of Australia who specialises in ethical investment – someone who can align your values with your financial goals – try the Responsible Investment Association Australasia. Experts often suggest you find an adviser who charges by the hour instead of receiving a commission.
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