Ethical Investing for Australians

I write about investing, because it's a key part of life. Spending less and investing means an automatic income. An automatic income means we can work less (if we choose) and definitely stress less.

But where to invest? What to invest in? Many people expect their money to be invested responsibly and ethically - rather than making money through things like cigarettes, weapons, casinos, adult entertainment, environmental destruction, and pollution from fossil fuels. Those are all things we could probably do with less of.

So how do we invest to get good returns - and to have a positive effect on the world? Here are some sources I've seen:

Ethical Investing in Australia

At Frugality and Freedom, Michelle has done a fair bit of research into Ethical Investing in Australia.

For herself, she's chosen Bank Australia for banking, Australian Ethical for superannuation, and two exchange-traded funds (FAIR and ETHI) for her share investing outside of super. She also gives details of 'runners-up' - investments she likes but didn't end up choosing.

If you're looking to invest in individual companies (rather than funds) looking at what companies these funds invest in can also give you some ideas.

(Update: More recently, Vanguard Australia have started an ethically conscious Australian shares fund, VETH)

Leaf ratings

This quick guide gives each ethical investment option a rating (from one leaf to five) based on the ethics of their investments. See how each of the ethical investment options rate (including superannuation) or go straight to the top 5 investments.

Save the planet with your super

In this free one-hour event on 29 October, Craig Reucassel will be joined by a range of guests to unpack the role our super can play in creating the world we want to live in and the simple steps to align your money with your values.

While 86% of Australians expect their super to be invested responsibly and ethically, the reality can be quite different. This event is good for you if you're keen to invest ethically but need to know more.

(Update: the event has passed, but the replay is available from the event page)

Choose your passion

If you are looking for a particular activity to invest in (or to avoid) then you may want to use the extensive database at Responsible Returns. You can choose your most important aspects of ethical investing and it will find the companies that suit your stated preferences.

Going global

One of the easiest way to invest outside of Australia is through ETFs. Here is a detailed comparison of three of the major ethical global shares funds available in Australia.

It compares what companies they invest in, their ethical screening processes, what countries they invest in, their financial performance and their fees.

If you want to go really deep it's a good resource. As the author points out, all three have different advantages, so it comes down to which you prefer in terms of what constitutes an ethical company, what you're looking for in terms of performance and what fees you are willing to pay. The author also states a preference, but it's unclear why he chooses that particular one.

In short

There are many ways to invest ethically. Whether it's in a bank, direct shares in ethical companies, an investment fund or your superannuation - there are options for you to invest well - both for you and for the world around you.

PS. In doing my research, I found this graphic on Australian Ethical's website. It's a good summary of some of the benefits of investing ethically.

The webinar that I mentioned included this graphic from a study done in 2019. It seems responsible / ethical investing also has other advantages. The funds that invested responsibly financially out-performed the others. The most responsibly-invested funds did even better.