Ethical investment

A new book helps those of us without a lot of financial knowledge put our money where it will do us – and the world at large — some good, writes MYKE BARTLETT.

Making money and being ethical don’t always seem to go together. Even if we don’t buy into the 80s maxim that Greed Is Good (popularised by the lead character of the 1987 film Wall Street), there’s a sense that making moral compromises is often necessary where money is concerned. Many of us worry that we simply can’t afford to be as ethical we might like. A new book argues that investing in ethical businesses might be easier than you think — with benefits for the environment, your sense of wellbeing and, crucially, your bank balance! Nicole Haddow, author of The Ethical Investor, says she had never thought about being an investor. “There was always a mental barrier,” Nicole says. “I had an idea in my head that it was going to cost me thousands just to get started.” A bit of research revealed that there is now a range of sophisticated micro investing apps that allow beginners to start small at minimal financial risk. “I started buying shares by apps and that helped me understand what I could afford, what was appropriate, how the market was performing, and also gave me the confidence to go further. So the barrier to entry is not what it used to be.”

The Ethical Investor is Nicole’s second book, following on from Smashed Avocado, which offered a guide to rentvesting — where first homebuyers purchase an investment property in an affordable area, but continue to rent a home in a more desirable location. It was a practice that had worked very well for Nicole, until an extraordinary year threw everything into chaos. “At the start of 2020, we had terrible bushfires and a pandemic started. My tenant moved out of my property, and I was in a situation where I needed to sell. So I did sell the property. The challenge for me was, what do I do next? I wanted to be in a position where my money wasn’t all in one investment.”

Most of us are already investors, of course, even if we haven’t given it much thought. Our superannuation funds are investing our money in stock they hope will pay off enough to allow for a comfortable retirement, but Nicole says she had never investigated where that money was actually being invested. “I hadn’t been giving a great deal of thought to my superannuation,” Nicole says. “And when I did call my super fund and ask where my money was invested, they couldn't give me the information that I needed.”

When she looked into ethical alternatives, it quickly became apparent that many ethical funds were happy to be far more transparent about what they would do with her

money. Changing to a fund that matched her own personal ethics was easy to do, after a bit of research, and has meant that she is now far more engaged in how her super is performing. “That's something that I hadn’t considered before. I'm now watching how they perform, knowing that I don't need to stay with them. If it doesn't work, I can move elsewhere. I think the thing that people need to understand is that they do have choice, they do have power. And if they're not happy with the performance of their fund, they can find another one.” Some might worry that supporting environmentally friendly causes or other ethical companies might mean a financial sacrifice. Surely it’s more profitable to invest in companies that aren’t bound or regulated by ethical concerns? Nicole says that simply isn’t the case. “If we talk logically about where the world is going, I don't see that something like traditional mining, for example, is necessarily a good investment. Renewables have a huge potential. Generally speaking, environmentally responsible investment is outperforming the ASX benchmark. I don't think people should think that ethical investment means taking a loss.” While investors should feel confident in supporting forward-looking companies, Nicole does add that not every investment is the same and people should seek expert financial advice before sinking their money into shares. She’s also aware that ethics are a very personal thing and, while she isn’t pushing her own beliefs onto any other would-be investors, suggests that beginners dig a little deeper into what any company means when it describes itself as ethical — as there is no strict criteria. “You need to go in with your eyes wide open, a lot of companies will say that they're considered to be ethical or sustainable. There’s not a lot of regulation around putting a sustainable label on a financial product. So there’s a bit of effort required to make sure that you're comfortable with the decision you're making.” For Nicole, being more mindful of where her money is going has brought her a great sense of wellbeing. She has chosen to invest her super in a company run by women, as a means of addressing the financial inequalities many women face. Other investors may be driven by environmental concerns such as addressing climate change. Choosing where your money is spent is a small and easy step towards changing the world, Nicole says. “I really, really like that I personally can move the needle. It might be very small in the grand scheme of things, but I think as more people look into this, there is a huge opportunity to drive significant change.”

DISCLAIMER: Anyone interested in investing must seek independent financial advice. Diabetes WA does not endorse any investment strategy.