What is Ethical Investing, and How Does that work?

Are you thinking about investing in the stock market? What if the company doesn’t have the same beliefs you do? Don’t feel discouraged Mujeres. Through “ethical investing” you can find profitable companies that believe what you believe. Don’t give your dinero to companies that don’t have good ethical standards, invest in companies with good morals. Profitable and ethical investments can turn up in any sector or industry. You don’t need Wall Street to help you find wealth.

What is Ethical Investing, and Why Does it Matter?

Ethical Investing is the practice of investing based on your individual values. The idea is that you contribute to positive change in society while still making a profit. Ethical investing means finding profitable companies that share your personal beliefs. Woman-owned businesses may be good investments for those with strong feminist beliefs.  

Many of us don’t want to invest because we see greedy corporations all around us. They claim to support their employees but only provide 2 weeks of maternity leave or pay minimum wage for grueling work. So, people lose out on mass profits and let their dineros slowly erode from inflation. Why not find a good company that will help you accumulate wealth?

You can increase your family’s wealth without worrying about where the money came from. If you grew up less fortunate, companies that donate to low-income charities might be a good idea. Companies with extended maternity leave may be more ideal than ones known for mistreating workers.  

How do I know if a company is ethical?

Ethics are subjective, so a company’s ethics depend on whether you agree with how the company operates. If you really dislike a company’s model, you will likely think of them as unethical. But if you support a company, they are probably ethical in your eyes.

Now is the time to ask yourself, how do I know if this company is ethical? Here are four places to look in 2022 to find a company’s morals and ethics.

Mission Statement

If you’re looking for ethical investments, it’s not always as easy as opening your Robinhood app. But it could be easy as going to the company’s website.

Every company website has a “Who we are” or “About us” page (usually at the bottom of their website. This page provides a little of the “what” and the “why” behind the company’s operations.

According to their mission statement, Beyond Meat, a meat substitute company, claims by “shifting from animal to plant-based meat, we can positively affect the planet”. We see the “what” is shifting from animal to plant-based protein, and the “why” is to have a positive change on the planet. For someone who is vegan, a company that doesn’t use animal bi-products is likely to align with their morals.

Code of Conduct

Companies must have behavioral standards that employees must abide by, also referred to as a “Code of Ethics”. This explains how employees must act, from conflict resolution to insider trading*. This can be found on the company’s website or by searching “[Company Name] Code of Conduct”. The idea is that by publishing this information, this sets the standard for employee behavior and is added protection for the company. No code of ethics? What behavior are the employees getting away with? After all, a company is only as ethical as the behavior they allow.

Every employee, from the janitor to the CEO, has an obligation to adhere to the company’s Code of Ethics. But do they really follow and enforce these codes? To answer that, you would only have to look as far as Amazon or Google. You can also look to the media for some insight.

News Reports

You might not always have the time for in-depth research of every company you come across. An internet search using “[company name] bad company” shows recent scandals or bad press. For example, the top results for “Nestle bad company” provide articles describing it as “hated” and “evil”. Does everyone feel that way? Maybe, maybe not. With cell phones and the amount of news outlets covering the stock market, it’s not easy for companies to hide.

Companies that are ethical are often known for their ethics, which means that other people will want to invest in them for this reason.

Broker Funds

Looking to invest in more than one ethical company? Brokerages like Vanguard and BlackRock have created funds with the idea of ethical investing in mind. Brokerages consider environmental, social, and governance issues to decide which companies to include in the fund. Investing in these funds would be like buying any other Index Fund; difference is what companies go into each fund. Buying a share in these funds may even be cheaper than buying shares in an individual company.

If you would rather invest in a company directly, each fund has a list of companies currently within that fund; referred to as the “Holdings Detail”. If you don’t know where else to look, that would be a good starting point. 

Tips and Reminders for ethical investing

Morals and ethics are generally relative. There are general opinions that almost everyone agrees with, like “all murder is wrong”; there are beliefs that are nothing more than a difference of opinion. If Person A invests with a company that Person B thinks is evil, that doesn’t mean Person A is evil. So, it is important not to condemn someone just because they invest in a company you wouldn’t.

You can contribute to positive growth and grow your wealth at the same time. Not every company is corrupt, and not all good companies are profitable. But it’s not impossible to find companies that fit your morals. More importantly, it’s very possible to find profitable companies that fit your morals. Look at the existing funds with popular brokerages. Search for companies that regularly contribute to charities. Some companies run their own charity.

If you want to hear more about ethical investing, you can learn more on my latest episode, where I talk with Judy from Hear me Finance about what makes an investment ethical, where to find them, and how to decide for yourself. You can listen to that episode here:

*Insider Trading: Taking advantage of information not available to the public and using it to make a profit for yourself.

 Luzy is passionate about teaching Latinas and WOC how to decolonize their mindset, increase their income, and become investors. Luzy learned about investing and wealth building by accident in 2019 while pursuing her MBA and started questioning why money management fundamentals are not taught in school. Luzy is a first-generation investor, a mother of two, and a wife. In May 2022, Luzy became a contributor author of Today’s Inspired Latina Volume X, where she shares her story of success despite adversity.