This guide takes you through the basics of ethical investing in Australia, including the best ways to invest in shares, ETFs, managed funds, and Super in line with your personal values.
Whatever name you want to give it, there’s something to investing in line with your values that makes it worth giving a d*mn about.
We can’t predict the future or what’s coming our way in life, but we can certainly take steps to set ourselves up for the best chance of success. Whether it’s your future career, family or investment portfolio, there are things you can learn and changes you can make to be sure you’re ready for what the future holds (or at least resilient enough to handle any surprises life deals your way).
Investing according to your personal ethics is one way to make sure you’re comfortable with your investment portfolio and help you sleep at night. I describe the sleep at night factor as the thing that allows you to go through the day without stressing about your investment portfolio and overall financial position – a personal must-have.
So how can you go about investing ethically in Australia and cut through the noise and jargon?
I’m going to walk you through all the major options and point you in the direction of many helpful resources, including our free Ethical Investing 101 Course, if you’re up for the challenge!
However, if you need a primer on the basics of ethical and sustainable investing and some of the key jargon you should know about, I’d highly recommend watching the below video.
Alrighty, let’s jump into all the ways you can invest in line with your values in Australia!
Ethical investing in shares
Let’s start with investing in companies, everyone’s favourite topic. Possibly the most interesting of these options and the way to gain the most control over your portfolio, ethical investing is an option for those willing to put in the time to being a DIY analyst.
Using a share brokerage account you can buy just about anything you want, including Australian shares (ASX) and international shares (you might need a separate US share trading account for this). Direct or individual share investing gives you maximum control over your investments. While control can be great, it comes with a heavy responsibility on you.
If you want to go down this road, please take our beginner shares course and subscribe to 3 newsletters or podcasts, and just read or listen for a month before you buy anything. And start small. The minimum amount you need to own ASX (Australian) shares is $500, plus a small amount for brokerage (e.g. $10 per buy or sell).
This video covers 5 tips for ESG investors, which will help you get started with ethical share investing.
Picking sustainable and socially conscious ETFs
Exchange Traded Fund (ETF) providers build their ethical ETFs using many different index approaches, including ESG (environmental, social & governance), negative screening, socially conscious and sustainable or actively selecting positive impact companies.
Head to each ETF provider’s website and look for the options that include the words mentioned above. You’ll then be able to look at their specific methodology and how they screen out/in companies based on their ethical feature.
Get started by checking out:
Ethical micro-investing and robo-adviser options
Sometimes you just want an app that can solve your problems for you. You might know everything there is to know about ethical investing strategies and your personal values, but at the end of the day you just don’t have the time to execute on this knowledge.
The great thing to know is that companies have emerged to solve this problem for you. From sustainable ETF portfolios to in-app ethical screens, there are a number of different solutions to help you in building an investment portfolio that aligns with your values.
Let’s explore some of the options available to you in Australia right now.
- Goodments – fractional US share investing with ethical filters
- Raiz Invest – Emerald Portfolio (micro-investing)
- Spaceship Voyager – Earth Portfolio (micro-investing)
- Stockspot – Sustainable ETF portfolios (robo-adviser)
- Six Park – Sustainable ETF portfolios (robo-adviser)
Read my article on ethical investing apps for Australians to learn more about each of these.
Australian ethical Super funds
There’s always a look of shock on someone’s face when they discover that they can choose how their Super(annuation) is invested, which only increases when they head to their myGov account to discover that they’ve actually got some.
Our world these days is filled with so many choices and so much information that we can forget how much control we have over our finances. When you start to dive into the world of finance you’ll start to realise that you have a lot more autonomy over your finances than you may have realised.
Not only can you pick the company you bank with, the insurances you take out or who you invest your super with, but you can actually choose which companies you invest your hard-earned dollars in.
Head to our Super course and read this article to learn more about this thing that may one day become your biggest asset. You can also explore your current Super fund’s approach to climate change issues on the Market Forces website.
With that in mind, I’ve compiled a list of Super funds that offer ethical investment options for you to explore, so you can have more control over where your $$$ are going.
- Australian Ethical
- Future Super
- AustralianSuper – Socially Aware portfolio
- Sunsuper – Socially Conscious Balanced Portfolio
- Hesta Super – Sustainable Growth Portfolio
- Aware Super – Diversified Socially Responsible Portfolio & Australian Equities Socially Responsible Portfolio
- NGS Super – Socially Responsible Diversified Portfolio
Ethical managed funds
The final option I’m going to leave you with is investing in ethical and ESG focused managed funds. It’s probably more of a boutique choice and there are a number of small ones operating in Australia, but bear in mind that the fees may be higher.
I’d encourage you to do quite a bit of research into how managed funds work and the different options available before diving in, but they are another viable option to consider in Australia.
Don’t forget to investigate the historical performance of the fund, look at the management and performance fees and read the Product Disclosure Statement (PDS) prior to making any decisions.
Level up your ethical investing skills
It’s important not to forget that your ethics are your own. While pre-built strategies, screening techniques, and processes can come close to resembling your ethics, you might need to compromise a little bit. For example, you might be completely against alcohol companies (your ethical principle), but when it comes to society’s values, the ETF or Super fund you’re investing with might have a beer company in the portfolio (since it aligns with the fund’s ESG framework or investing policy).
So there you have it folks, there are more choices than you probably realised out there, which is fantastic! Keep an eye on financial companies over the next few years, as I expect there will be plenty more innovation and development in this space!
If you’re ready to level up your ethical investing game, take our awesome free Ethical Investing 101 course on Rask Education today.