How to Invest - Making Ethical and Sustainable Choices

Most of us try to do good things with our money when we can. Maybe you donate to charity, give a little extra cash to a friend in need, or simply make conscious decisions as a consumer. But what about your investments? For many of us, investments represent our greatest owned assets aside from our house and we want to feel good about what our life savings are supporting. The demand for including information on things like environmental stewardship, social responsibility, or ethical governance in the financial analysis process has skyrocketed in the last 20 years and it's changing the investment world in a big way. Here are some easy-to-use tools to help you take a little deeper look at the investments you hold and the values they embrace.

Mutual Funds & ETF Investments

Just this year, the leading mutual fund research firm Morningstar teamed up with Sustainalytics to develop an impressive measurement system. Using a 1-5 Globe scale similar to their famous 5-Star financial scale, Morningstar ranks mutual funds and exchange-traded funds by a comprehensive set of sustainability metrics. They analyze data from 3 broad categories: Environmental, Social, and Governance and then deduct points for Controversy risk. The resulting score allows them to rank funds against their peers. Considering mutual funds make up the greatest portion of all retirement plans and investment accounts, this tool can help you quickly identify where your fund stands on things like contributing to climate change, human rights, or lobbying activities. It gives you insight into the ethics & activities of your underlying stocks revealing additional risk factors that can affect your funds financial performance.

Stocks

Morningstar is great for funds, but what about individual companies? There are many publicly available resources that put companies under a microscope for all sorts of ethically valuable information. The 500 Greenest Companies tends to have an emphasis on environmental issues, while the Most Ethical Companies tends to lean more towards social and governance metrics. CSR Hub may require a subscription for detailed reporting, but you can see the sustainability ratings on companies and their social responsibility scores for free. To really narrow it down you can use Corporate Knights Most Sustainable Companies and see what they consider to be the best 100 companies in the world. The information found on these lists are just another step in the process of considering which investments match your values and may make the most financial sense for your goals.

Bonds

Although there are a smaller number of social bond funds, ETFs and individual bonds, you can still approach bond investing with a high level of ethics. One way that is best for your non-retirement accounts (taxable) is to choose good municipal bonds that are local to you and are used to build schools, improve communities, or help other social causes like low income housing. These are great for your brokerage account because you also get the advantage of federal (and state, if local) tax free income! Additionally, you can always try to select corporate bonds that are offered by the same highly ethical companies you discovered from the company ratings you gathered from your stock research.

Direct Impact Investing

If you want an even deeper connection to your investment, impact investing is becoming an increasingly popular new alternative. Direct impact investments include areas like community investing, microfinance, private funds, and crowdfunding. All of these options can make an impact on a local level, help small businesses or farms, empower impoverished communities, or invest in specific projects. When added appropriately, they can provide a unique way to diversify a portfolio while offering you personal fulfillment and a reasonable return. But they may also have higher risks than traditional investments, like a greater chance of principle loss and longer term requirements, where your money is inaccessible for extended periods of time. So, as with any investment, making sure you fully understand the risks before investing is highly recommended. Additionally, some investments may have high dollar minimums or require you to be an accredited investor making it harder to find the best choice. A good consideration is to meet with a financial adviser who understands these investments and can help guide you on how to fit them in your personal investment strategy.

When you think of meeting your financial goals while making the world a better place, it is easy to see why investing this way is growing with such popularity. But there are financial reasons to consider this approach too. Research shows this process can reduce additional risks and improve the consistency of your financial performance. 80% of the studies done on sustainable and ethical investments show that companies with good, sustainable practices perform better on stock price than those that don’t. Check out how your own investments are doing by using some of these tools or have them professionally scored through our Ethical Investor Report, at no cost. We are also always happy to answer questions on specific investments as well through email at team@ccminvestment.com.

This information is for educational purposes only and is not an offer to buy or sell, nor a solicitation of any offer to buy or sell the securities mentioned herein, or considered to be the rendering of personalized investment advice. Past performance is no guarantee of future results. Therefore, no reader should assume that future performance of any specific investment or strategy (including the investments and/or strategies discussed), will be profitable or equal to past performance levels. Conscious Capital Management, LLC assumes no responsibility for loss or damages resulting from the use of this information. A professional advisor should always be consulted before implementing any of the options presented.

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Conscious Capital Management is a registered investment adviser. We have a goal to provide Madison  Wisconsin's best Financial Advisors, Financial Planners and Socially Responsible Financial Advisors. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any securities. Past performance is not indicative of future results. Investments involve risk and unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed here. This website is intended for Wisconsin residents only.

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