What Is Ethical Investing?

August 23, 2021 13:57 UTC

Does the prospect of making a profit whilst also doing some good appeal to you? If so, then you might just be interested in ethical investing. In this article, we will explain what ethical investing is and show you how you can get started. We will also share a couple of ethical investments which you might want to consider adding to your portfolio in 2021!

What Is an Ethical Investment? 

An ethical investment can be described as an investment which is made in line with one’s individual morals. Whereas a traditional investment is usually chosen with the sole intention of financial gain, an ethical investment seeks to make profit whilst also remaining true to one’s ethical beliefs. 

We can differentiate two distinct approaches to ethical investing: 

  1. Avoiding investments which conflict with one’s ethics. For example, a vegan may refrain from investing in a company which tests their products on animals.
  2. Seeking investments which aim to actively achieve a positive impact in the world. For example, investing in a company engaged in green energy solutions.

Historically, ethical investing was mostly concerned with the first of these approaches, however, there has been an increasing shift to the second approach from investors in recent years, which we will look at more in the next section. 

The Background and Outlook of Investing Ethically 

Far from being a completely new phenomenon, as far back as the 18th century, the Methodist Church forbade its followers to invest in companies engaged in certain industries, such as alcohol, tobacco or armaments.  

As awareness of the negative impact which a lot of human activity has on our planet has increased, so too has the popularity of investing ethically and responsibly.  

In 1971, the world’s first socially responsible fund was launched by Pax World in the United States. This arrived after an increase in ethical investing in the 1960s, as many investors sought to avoid companies which profited from the war in Vietnam.  

But in more recent years, this style of investing has gained a lot of traction, especially as the issue of climate change is being increasingly highlighted by experts and activists. Not only has the popularity grown, but there has also been a recent shift in focus from simply avoiding certain investments to actively seeking investment opportunities which contribute positively to society. 

In 2020, investors pumped $51.1 billion into funds using ESG (Environment, Social and Governance) principles. This figure is more than twice the $21 billion invested in 2019, which itself was four times larger than the $5.5 billion invested in 2018. These figures serve to demonstrate the increase in popularity over the past few years. 

Moreover, the growth of this type of investing is expected to continue to grow, with a recent report from PwC forecasting that by 2025, up to 57% of mutual fund assets in Europe could be held in funds which consider ESG principles. 

Ethical Investing: What to Consider 

Is ethical investing something which you are interested in pursuing? As with any investment, there is so much to consider that it can be difficult to know where to get started.  

First of all, you need to consider what your ethics are and how they will influence your ethical investments. Are you concerned about the environment and climate change? Or is animal welfare a bigger issue for you? 

Once you have established what your ethics are, you need to clarify how they will affect your investments.  

For example, let’s say that you are specifically concerned with climate change. You may choose to simply avoid companies which carry a burden of responsibility for damaging the environment, such as companies engaged in oil exploration and production.  

Or, maybe you want to invest your money in a company which is actively working to address the issue of climate change, such as electric car manufacturers. 

Once you have made these decisions, that will help you narrow down the field when looking for an ethical investment. However, the amount of investment choices can still be overwhelming, which is why in the following sections, we have listed a couple of ethical investing ideas for you to consider in 2021! 

Ethical Investment #1 – Beyond Meat 

Beyond Meat was founded in 2009 and is the largest plant-based meat company in the world. Not only are meat alternatives an important way of improving animal welfare, but also for reducing climate change. 

Depicted: Admirals MetaTrader 5 – Beyond Meat Daily Chart. Date Range: 9 May 2019 – 19 August 2021. Date Captured: 19 August 2021. Past performance is not a reliable indicator of future results. 

Beyond Meat debuted on the Nasdaq exchange in April 2019 and, although share price initially rocketed upwards, it quickly fell again and for the last year has been moving sideways.

Beyond Meat has significant future potential as it has already cemented itself in an industry which continues to grow as people around the world, particularly in developed countries, become more aware of the adverse effects large scale animal farming has on our planet.

According to their 2020 annual results, the company’s products are sold in around 122,000 outlets in more than 80 different countries in the world. Their plant-based meat products are stocked in Walmart and Whole Foods in the US and Tesco in the UK, whilst they have also recently announced partnerships with McDonalds and Yum Brands (owner of fast food chains such as KFC) to introduce their plant-based products as regular parts of their menus.

Despite the economic downturn caused by the coronavirus, the company recorded revenue of $406.8m in 2020, an increase of 36% from the previous year. Their gross profit also increased, by around 23%, to $122.3m.

With their new restaurant partnerships arriving at around the same time as developed countries have made significant progress in their coronavirus vaccine roll-outs, Beyond Meat could be in line for another positive year.

Ethical Investment #2 – Ørsted A-S

Ørsted is the largest energy company in Denmark and the world’s largest developer of offshore wind power. In January 2021, it was named the world’s most sustainable corporation in the Corporate Knights Global 100 Index. But this has not always been the case.

The company’s predecessor was founded in the 1970s under the name Dansk Olie og Naturgas, or Danish Oil and Natural Gas, and for around three decades they managed the Danish oil and gas resources in the North Sea. However, the company has since undergone a radical transformation, ditching the oil and gas portion of their business, changing their name and focusing on renewable energy in an attempt to combat climate change.

Since 2006, they have reduced their emissions by 86% and are aiming for carbon neutrality by 2025.

Depicted: Admirals MetaTrader 5 – Orsted A-S Weekly Chart. Date Range: 5 June 2016 – 19 August 2021. Date Captured: 19 August 2021. Past performance is not a reliable indicator of future results. 

Since being listed on the Nasdaq Copenhagen exchange in June 2016, Ørsted’s shares have enjoyed strong growth, with share price increasing by around 290% (as of 18 August 2021).

The economic shock from the outbreak of the Covid-19 pandemic was short-lived, with share price quickly recovering and going on to significantly surpass its pre-pandemic levels. However, share price fell for most of the first half of 2021 amidst disappointing 2020 results caused by a fall in demand for energy due to social restrictions.

The share price has since recovered and has been moving upwards for the last two months. Furthermore, Ørsted recently released their 2021 H1 results, which were far more positive, with revenue and profit increasing year on year by 20% and 186% respectively.

Ørsted looks like a company with a bright future and it continues to increase its exposure to wind power energy, expanding its operations into the US in 2020 and acquiring Brookfield Renewable’s wind power business in Ireland and the UK in June 2021. Those who are interested in ethical investing should consider adding Ørsted to their portfolio in 2021.

Can I Make Money With Ethical Investments? 

Some readers may be thinking “that sounds interesting, but can I actually make money investing ethically?” 

Unfortunately, there is not a “yes or no” answer to this question. 

Just like any other investment, an ethical investment can go up or down in value. Instead of asking yourself this question, you would be better off thoroughly researching the investment which you are considering to evaluate its chance of future success. 

Another important thing to consider is diversification. Diversifying your portfolio is very important in order to limit your exposure and, therefore, risk to any one industry.  

Ethical Investing With Admirals 

With an Invest.MT5 account from Admirals, you can make both of the ethical investments examined in this article, as well as invest in over 4,300 other listed companies from around the world!

In order to start investing ethically with Admirals, register for an Invest.MT5 account and then follow these steps:

  1. Download and log in to the MetaTrader 5 trading platform
  2. Press Control + U in order to bring up the Symbols window, shown below. From here you can search for your ethical investment and then click ‘Add Symbol’ followed by ‘OK’

Depicted: Admirals MetaTrader 5 – Symbols

  1. Now head to the Market Watch window on the left-hand side of the screen, locate the symbol which you just added, right-click on it and select ‘Chart Window’ to open a price chart
  2. Click ‘New Order’ at the top of the screen to bring up an order window, select the amount of shares you wish to purchase and press ‘Buy’ to send the order to the market!

Depicted: Admirals MetaTrader 5 - Beyond Meat Daily Chart. Date Range: 19 January 2021 – 19 August 2021. Date Captured: 19 August 2021. Past performance is not a reliable indicator of future results. 

Invest With Admirals

As well as over 4,300 stocks, an Invest.MT5 account also allows you to invest in over 200 different Exchange-Traded Funds (ETFs), whilst enjoying low transaction commissions and no account maintenance fees! Other benefits of this account include:

  • Use of the state of the art, world renowned, MetaTrader 5 trading platform
  • The ability to open an account with a minimum deposit of just €1
  • Access to our Premium Analytics portal, where you will find the latest market news and technical insight at no additional cost!

Click the banner below to register for an account today!

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Roberto Rivero
Roberto Rivero Financial Writer, Admirals, London

Roberto spent 11 years designing trading and decision-making systems for traders and fund managers and a further 13 years at S&P, working with professional investors. He has a BSc in Economics and an MBA and has been an active investor since the mid-1990s