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Your Comprehensive Guide to Ethical Investing

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Australia is home to a growing number of investors, with almost 10 million Aussies putting their money towards investments other than their superannuation, according to recent statistics from Finder. With so many more people showing an interest in growing their wealth, it’s unsurprising that ethical investing has also become a popular topic of conversation in recent times.

If you’re wondering how to invest your money ethically, EC Pohl & Co can help. We have created a comprehensive guide to help you understand ethical investments, how to identify them, and how to avoid investments that don’t align with your values.

What is Ethical Investing?

Ethical investing, also known as responsible investing, is when investors consider environmental, social, and governance (ESG) factors when investing. This allows investors to find high-performing companies that also align with their principles so they can build their portfolios and maximise their returns without compromising their values and beliefs.

How to Build Wealth Through Ethical Investments

According to the latest research report from the Responsible Investment Association Australasia (RIAA), 83% of Australians expect their bank account and superannuation to be invested responsibly and ethically. Whether you’re looking to build your own portfolio or invest with a managed fund, it’s important to understand how to grow your wealth in an ethically and socially responsible manner.

Building Your Own Portfolio

One surefire way to ensure your money is invested responsibly is by building your own portfolio. This will allow you to research each company you’d like to invest in to ensure their practices align with your ethics before you add them to your portfolio.

This strategy provides investors with a lot of autonomy and allows them to be a lot more thorough with their investments. However, it can also be incredibly time-consuming and may not be the most effective way for inexperienced investors to maximise their returns.

Investing With a Managed Fund

If you’d like to invest your money ethically but you’re unsure how to begin or which companies you should choose, ethical investment funds can provide the help you need. These managed funds will do all the research for you, providing you with a diversified portfolio that aligns with your risk tolerance, your financial goals, and your values.

How Do You Know if an Investment is Ethical?

Unfortunately, while ethical investing has continued to gain traction amongst Australian consumers, the number of companies accused of greenwashing and ethics washing has also continued to rise. So what is an ethical investment exactly, and how do you separate genuine companies and investment funds from duplicitous ones?

Consider the Industries and Sectors

One way you can ensure your investments align with your ethics is by considering the industries and sectors that you add to your portfolio. Whether you’re investing independently or through a managed fund, it’s important to ensure the companies in your portfolio don’t belong to industries that you consider unethical or unsustainable. These industries may include:

Tobacco
Weapons
Fossil fuels
Fast fashion
Agriculture
Transport

Watch Out for Vague Statements

A truly ethical investment company will want to be as transparent as possible with their audience so it’s abundantly clear they are not using ethics as a marketing tool. Using terms like “socially responsible”, “earth-friendly”, and “ethically minded” without clearly explaining what those terms mean and how they influence their business practices is a classic sign of greenwashing.

ASIC’s greenwashing information sheet details how any statements about an investment company’s commitment to sustainable/ethical investing should be backed up through the following information:

Clear definitions for all ethics and sustainability-related terminology
To what extent labour, environmental, and ethical standards are considered when selecting, retaining, and realising investments
An explanation of their investment screening criteria that outlines all exceptions, qualifications, and how much of their portfolio is covered by this criteria
A clearly defined sustainability target, how and when the company expects to meet this target, and how they measure progress

Read Through Their Policies

Ethical investment funds will not only claim to consider ESG factors, but they will also cement their commitment to considering ESG factors in their business policies and procedures. At EC Pohl & Co, our investment process is the responsibility of our subsidiary, ECP Asset Management (ECP), and we adhere to their policies at all times.

To read more about our approach to ESG and our commitments to responsible and ethical investing, feel free to check out the following ECP policies:

Research Their Philanthropic Efforts

You can usually tell how devoted an investment company is to ethics and sustainability by researching the causes they support and the charities they fund.

At EC Pohl & Co, we are committed to making a meaningful difference to both people and the planet. That’s why we created The Pohl Foundation to provide financial support to the causes that are closest to our hearts, including healthcare, wildlife rehabilitation, education, and the arts.

Check Their Certifications

Independent third-party certifications are another great way to tell whether or not an investment company is truly committed to making ethical investments. Any company that gives themselves vague certifications such as “100% green”, “energy-efficient certified”, or “certifiably environmentally-conscious” is most likely engaged in greenwashing.

At EC Pohl & Co, we value third-party certifications from reliable associations. That’s why our investment portfolios are actively managed by ECP, which is certified by the Responsible Investment Association Australasia (RIAA). ECP was also recognised as a Responsible Investment Leader for 2022 and is a proud signatory to the Principles for Responsible Investment (PRI) Initiative.

EC Pohl & Co are a funds management firm specialising in individually managed share portfolios for sophisticated investors. We focus on sustainable, quality growth companies listed on the ASX, using in-depth research and a long-term investment approach. As a family business, we aim to redefine wealth by considering well-being, responsibility, and connection alongside financial security.

EC Pohl & Co is a funds management firm, selecting quality companies and building high-conviction long-term investment portfolios for sophisticated investors.

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