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What is Ethical investment

As with the variety of individual ethics, there are varied approaches to how to go about aligning investment and capital with positive outcomes. 

We summarise all approaches into the five below sections for simplicity, however, keep in mind there are a number of other versions and funds including blending of the below strategies. 

It is important to note there is no one way to approach Ethical investment, and often a multi-tiered approach is best. This is also a constantly developing area, progress over perfection. 

ESG

ESG Stands for Environmental, Social and Governance, and has almost become the colloquial term for Ethical investment within the industry. It is simply a process of identifying and filtering companies that have processes and procedures for quality consideration in these 3 areas, in doing so reducing investment risk and the likelihood of controversy.

This approach can be quite varied and most Australian Fund managers actually have some form of ESG stage in their investment process, whether they use to it its fullest capacity is another thing. Australia lags the world in this area, wherein some more progressive markets ESG is the norm. 

Look for: Investment Managers that have not only a strong ESG process but use that stage to select their investments. 

Watch out for Investment Managers that market ESG, but lack substance and a hard line on companies that don't agree with your values. 

Shareholder Advocacy

We also see this used a lot as a responsible and ethical investment strategy. Advocacy states that without a voice at the company to vote against bad behaviour and for good behaviour, you cant change a Company's ways. This is not untrue and we have seen a number of examples where shareholders have voted to change a companies practices in positive ways. 

Look for: Investment Managers that have high voting records on climate matters. Company directors  are beholden to shareholders, so voting can make genuine change. 

Watch out for Buzz words and empty marketing - where a fund says they hold a particular company to promote change, but never actually vote for resolutions that could do so. 

Negative Exclusions

This approach is also quite common, where an investment manager will exclude companies that profit from undesirable areas such as thermal coal, tobacco or armaments. This is an easy approach for investors to use as an alignment as it can be quite simple and clean-cut. 

The idea is through divestment you can send a message to major companies with poor behaviour to change. 

Look for: Clear and concise definitions of what is and is not included or partially excluded.

Watch out for: Not all exclusions are equal, with thresholds within their exclusion ranges (which can result in still holding misaligned companies) or being misleading - for example stating they don't hold Australian Listed Tobacco producers, which is true, because they don't exist. 

Best Of Breed

A more in-depth version of ESG best of breed uses more positive approaches to identify leaders in the industry in the way of social engagement internal governance and environmental practices. Through this, they aim to encourage better behaviour through investment, the carrot, where negative exclusion investment is the stick. 

Look for: Clear and concise definitions of what is and is not included or partially excluded.

Watch out for: Holdings withing the fund that you may not want to be involved with. 

Impact Investment

Impact investment is a step up again on the best of breed approach from a positive standpoint. This approach involves investing directly with companies through shares and green bonds, that are directly involved with sustainability and human rights. 

These areas tend to fall around healthcare, technology, food and water security, waste management and power generation. 

Look for: Impact funds that provide not only investment return information but quantifiable social returns. 

Watch out for: Greenwashing can be very common especially in Green/Impact Bond funds. 

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Chanie, Preston - One of our Ethical investors

Nathan is super skilled at making you feel comfortable enough to make financial decisions (big or small) under his guidance. He offers solid financial planning advice without all the jargon you’d expect from his industry.

Our Holistic Approach

 

If you come to see us about investing some money we won't just throw you into a hot stock tip, or some managed fund we like because they make good pens. If you come to see us about investing your money, whether in property, shares or something else entirely, we will go through the following with you:

  1. Deep dive into your goals and situation, purpose and personal ethics. 

  2. A candid discussion around realistic outcomes, and the real risks of investment

  3. Education and Empowerment about how investments work - to enhance your understanding

  4. Stress testing your resolve to ensure you are comfortable with investment

 

We can provide investment advice on 

  • Shares and Bonds

  • Managed Funds and ETF's

  • Property Strategy

  • Superannuation and SMSF

  • Borrowing to Invest

  • Generating Passive income

  • Insurance Bonds

  • Advanced Debt repayment strategies

The Process

The First Step

The first step can be daunting - but just give us a call!

We offer a free 30 minute phone consultation to see if we are the right fit, and if we can help you. 

Options

Before you commit to a financial plan we will take the time to fully understand your situation, your dreams and your challenges - and will give you an idea of your options and any costs involved, so you can make an informed decision. 

Advice

The advice stage provides you with a step by step plan to create a fulfilling retirement, maximising your financial aspects. 

Service

Our process does not stop at just providing advice. We will work with you to implement your plan and get you on the road to your dream retirement. 

Give us a call on 03 9801 8822

Email us at planning@limefinancial.com.au

Find us at Suite 405, Level 4, Knox City Centre (in the tower) Wantirna VIC 3152

DISCLAIMER: The information contained within our website is of a general nature only and has been provided without taking account of your objectives, financial situation or needs. 

Because of this, you should consider, with or without the assistance of a financial adviser, whether the information is appropriate in light of your particular needs and circumstances.

Fradburg Partners Pty Ltd ATF Fradburg Trust TA Lime Financial Planning ABN 17 871 636 873 is a Corporate Authorised Representative of

Affinia Financial Advisers Limited AFSL No. 237857 ABN: 13 085 335 397

We acknowledge the Traditional Owners of the land on which we live, work and hold our meetings including the Warundjeri People and other Traditional Owners not recognised by the State Government. We pay my respects to their Elders, past and present, and the Aboriginal Elders of other communities who may be here today.