More investors in the UK are beginning to understand that the impact of the investment opportunities they get involved affects not just their portfolios, but also their society and the world in general.
More than £600 million from individual investors flowed into ethical funds in the first half of 2018, according to the Investment Association, the UK asset management trade body.
A research conducted to identify the UK public's attitudes to sustainable investing shows that most people want their investments to avoid harm and do good for people and the planet.
3 out of 5 people believe that financial institutions should stop investing in businesses that are detrimental to people of the world. 30% say that they do not think businesses apply the same ethical and environmental standards in developing countries as they do in more developed countries. Over 70% of people say that they want their own investments to avoid harm and achieve good for people and the planet.
UK investors now realise that they can contribute to making positive changes by supporting startups that are making positive changes happen.
However, although ethical investing is increasingly becoming a buzzword in the UK, many investors still don't understand its means or how to do it.
This blog post will explain what ethical investing is, what would qualify as an ethical investing, and why you need to do it.
What Does Ethical Investing Mean?
Frankly, there's no industry-standard definition of "ethical investing." There isn't an agreed-upon term for it either. You can hear several different words used interchangeably for this, such as impact investing, socially responsible investing (SRI), sustainable investing, environmental, social, and governance (ESG) investing, values-based investing, conscious investing and green investing.
With several different things to call it, it's no surprise that a portfolio manager can't get certified in ethical investing. An ethical investment portfolio of one investment-management company might involve a different slate of stocks than another.
However, if we don't know what to call it and no one's in charge of what defines it, how would you know if you're engaging in it?
Well, we don't know. But you do.
The only thing that defines whether or not an approach to investing is ethical or not is you. You invest in industries whose values align with your values, and you deem ethical and avoid the initiatives whose values don't align with yours, and you don't consider as ethical.
Ethical investing is the practice of using one's moral principles as the primary filter for selecting where to invest. This entirely depends on the investor's views. Ethical investments usually excluded companies that make weapons, partake in animal testing, or invest in the gambling industry.
Some ethical investors also avoid investing in sin stocks - a publicly-traded company involved in or associated with an activity that deals with morally dubious actions. They perceive as making money from exploiting human weaknesses and frailties such as sex-related industries, alcohol, tobacco, and companies that manufacture weapons.
The world has progressed, and investors can now back the companies shaping the future world we will live in and do business better through impact investing and environmental, social, and governance (ESG) factors.
These companies actively and measurably seek to have a positive social or environmental impact, picking up on governments, global organisations, and individuals' desire to improve the world.
Investors use their cash to influence companies to be more socially and environmentally responsible while earning from future trends.
What Would Qualify as an Ethical Investment?
According to the Government Actuary Development Investment Bulletin, there are things to consider when investing responsibly:
The ESG criteria have set out the range of factors that need to be taken into account when making responsible investments, such as:
- Environmental criteria, which involves looking at a company's performance as a steward of nature, the environmental risks they face, and how these are resolved or managed
- Social criteria, which are used to assess how an organisation handles relationships and their impact on communities
- Governance factors, which involves looking at concerns such as executive pay, audits, and shareholders' rights
Many investors believe that ESG variables are essential for them because they are likely to be strongly linked to the business's overall success or failure.
Therefore, investors are looking at these criteria when evaluating investment opportunities and seeking to influence corporate decisions as shareholders.
Why Do You Need to Do Ethical Investing?
The Rise of Social Responsibility Among Consumers
More and more people living in the UK are becoming increasingly aware and concerned about the impact their purchase decisions have. This means that consumers now pay much more attention to factors such as whether companies cause pollution or use animals in laboratories for testing.
As the world's resources start to run out and the planet's weather changes, environmental stories increasingly hit the headlines. A day rarely goes by without news reports on oil supply, carbon emissions, or the projected flood map. These kinds of facts absorbed by people and manifested in by desiring to lower their carbon imprint by using electricity or energy more wisely.
You Can Make a Difference
By supporting socially responsible startups, investors are making their contribution to making positive changes happen by supporting startups that are making this happen. When you commit to ethical investing, it's an opportunity to withhold your investment from businesses that are corrupt or are destroying the world.
This would send a message that if only more people invested in companies that act responsibly, the companies that are destroying the world would be forced to shape up and make better choices.
You are making a change in the world while making a few quid at the same time.
It Lowers Your Investment Risks
In ethical investing, you don't have to sacrifice profits for principles. Ethical investing typically involves investment in the few industries that have maintained positive growth throughout the global recession. In many cases, ethical investments have outperformed more mainstream investments.
The UK government is taking steps to ensure startups and companies classified as ethical and socially responsible become sustainable.
An example of this is Sustainable, Responsible and Impact investing (SRI), an investment discipline that considers environmental, social, and governance (ESG) criteria to generate long-term financial returns and positive societal impact.
Top 5 Socially Responsible Startups Worth Considering
Socially responsible companies use their position and means for something more than their interests. They use a business approach that focuses on social change, sharing its success with its local and global communities.
This isn't to say that socially responsible companies are not concerned with profit. These companies are just embracing their responsibility to impact the communities positively they benefit from and weave that obligation into their business.
Although most of us don't have an entire business to contribute to the global solutions we want to see, our responsibility for the world isn't just on businesses; it's also on us as consumers.
Our impact is primarily made by what companies we support. We can make a significant impact by choosing to spend our bills with socially responsible companies.
Here are Top 5 Socially Responsible Startups Worth Considering:
Imagine a plastic that's good for the environment as it is for business and personal convenience. It's a dream with the potential to become a reality.
Teysha Technologies brings together top international research scientists and elite process and commercialisation experts dedicated to a common cause: developing unique intellectual property aimed at solving the world's plastics pollution problem.
Teysha results from more than a decade of searching, understanding a problem, and striving to find a solution. The Tisha team has developed unique IP, collaborates with the world's leading research scientists, and partnered with the UK's elite process and commercialisation professionals to create a product and a company that has an entirely new and unique solution to plastic pollution.
NextGen Nano is a high-tech company that focuses on the empowerment of an individual.
By decentralising power generation from governments and traditional grids, NextGen Nano strives to have a deliberate positive environmental impact while reducing dependence on pollutants and limited materials.
In line with recent government CO2 emissions and climate policy goals, NextGen Nano has built a benchmark IP that could be the gateway to advances in energy decentralisation.
Our breakthrough technology replaces existing solutions (fabricated with pollutants, finite materials) with earth-friendly biopolymers. This breakthrough enables NextGen Nano to develop solar cells that produce energy with unrivalled efficiency at a far lower cost than existing hardware.
This technology allows robust, transparent cells to be applied to flexible surfaces, making it more usable and cost-effective than ever before and practical for multiple potential real-world applications.
POA LONDON is a Swedish accessory brand based in London. POA delivers timeless designs in basic colours that boast minimalism and Scandinavian simplicity. They are animal and environmental friendly by using materials which classified as vegan. POA encourages and promotes fashion that is more sustainable.
Einee is an EdTech app that teaches and inspires children aged 6 to 14. It allows them to speak with famous characters from real life, such as Einstein and Cleopatra. Einee is highly educational and highly playful at the same time.
Einee plants seeds of inspiration and knowledge into the children's minds without them even realising it. The kids are focused on collecting coins, trophies, and making the characters perform goofy emotions that they hardly realise that the app is educational.
StorkCard enables parents to take back control by providing AI-driven cost predictions, personalised financial solutions and an easy way for family & friends to offer support.
StorkCard also chose to be part of the Finance Innovation Lab's Financial Health Fellowship, which helps social enterprises work in financial health and well-being. They also featured in the London Assembly's report to the Mayor on how to improve the financial health of Londoners.
How Can a Crowdfunding Consultant Help
Here at Trendscout, we believe that startups have the potential to make a difference.
From revolutionising how we think about business and profit in identifying innovative solutions to some of our most common challenges, startups play a vital role in the world's economy.
That's why our platform aimed to bring together some of the market's most excellent opportunities, with serious investors who want to see that change brought to life.
Our team of consultants will become an extension of your team. We will get to know you, your team, and your business offerings. This will help you gain insight into your pitching and further refine your model.
We have the knowledge and experience. Over the years, we have built up the expertise to conduct crowdfunding campaigns, and you will get the help and support of knowledgeable crowdfunding experts in our team.
As you become part of our TrendScout community, we can also help you achieve a higher funding goal and expect it to be achieved because we can guarantee your campaign's maximum possible investment return.
Ethical investors use their cash to influence companies to be more socially and environmentally responsible while earning. By committing to ethical investing, we can all make a difference and make the world a better place.
If you are interested in committing to ethical investing, you can schedule an appointment with us today.
Rest assured that someone in our team will get in touch with you and help you every step of the way.