Q+A with The Ethical Investor: Nicole HaddowMar 04, 2022
Q&A: What makes an investment ethical?
That’s not for me to tell you! The thing about ethics is they’re really personal. My ethics and values might not be the same as yours, and that’s ok. From an investment perspective, I might be comfortable with something that doesn’t work for you, it really depends on what your financial goals and personal investment aspirations are. But generally speaking, people looking to make ethical investments screen out things that aren’t aligned with their values, which broadly include things like fossil fuels, gambling, tobacco and human rights abuses.
Is there a scale or is it up to the discretion of the investment company and their own criteria?
Yes, there’s definitely a scale, or a spectrum. For example, the concept of negative screening means removing any investment from your portfolio that’s blatantly not good for the environment, people, or society, but in many cases some companies will get through a negative screen because they’re OK - not terrible, but not necessarily amazing either. Each fund or organisation will have their own criteria, and you need to decide if that meets your standards. If you want to achieve best-in-class screening that is completely aligned with your goals, you will likely need to do a lot of personal research and speak to providers who meet those needs. For example, I spoke with a vegan who wanted her investments to be free of animal cruelty. She couldn’t find many general funds that met her standards, and therefore sought to make specific investments aligned with this personal value.
Why is it important to know where our money is being invested?
Well, because it’s your money, and your future! Whether it’s your super, banking or shares, that money might be serving you well into retirement. You deserve to know how and why it’s invested. You also deserve transparency, so that you can understand whether those investments sit well with you.
What was the thing that surprised you the most in all your research?
Honestly, I’d never been hugely engaged in my superannuation. I made a ridiculous assumption that all super funds are pretty much the same (they're not...). I was stunned when I called my fund to ask where my money was invested, and they couldn’t give me more than my ‘top 10’ holdings. I was invested in banks and mining companies that weren’t aligned with my values. I also didn’t believe some of the companies on the list were great investments. What I discovered is that many ethical super funds actually will tell you exactly where your money is invested, and I wish I’d realised this much sooner. Not only can being engaged help you to invest in things you care about, it can also be beneficial in terms of returns.
Who is the book for/ targeting?
The book is for anyone who wants to learn broadly about how ethical investing works across a number of sectors including super, shares, banking, impact investing and housing. It’s also good for people who have no idea where to start if they want to get into investing. Microinvesting was my first step into shares and exchange traded funds. I take people with me as I learn, so I hope that makes it really accessible.
What are some simple things we can do to check where our money is being invested?
First, call your super fund. Ask them to tell you where your money is invested. If they can’t, that might be a concern for you. Similarly, you might look into how your bank invests its customers’ money. The Market Forces website can help with this. Once you know what large institutions do with your funds, you’re better placed to decide if you want to remain with them or look elsewhere. If you’re ever unsure, talk to a trusted financial professional before making a decision.
Are there any tools we can use to find out if our current investments are bad or good ethically?
Once again, you first need to be clear on your ethics to decide if the companies you’re invested in make the cut. With a solid strategy, you can then do things like reading company reports to see how they’re performing. Admittedly this requires a bit of work and ongoing engagement in their activities. But it can be hugely rewarding too. I also keep an eye on the news. If a company that I’m invested in makes the news for the wrong reason, that’s certainly going to be something to think about.