Are you interested in changing the world while you grow your superannuation? Then you need an ethical investment strategy.
“If it’s wrong to wreck the planet, then it’s wrong to profit from that wreckage.”
So says Bill McKibben, founder of 350.org, an organisation dedicated to 100% renewable energy. As an investor you can play a critical role in helping environmentally friendly businesses take centre stage.
Superannuation is a mandatory investment, yet countless superannuation funds have holdings in businesses that have seriously unethical practices, such as animal cruelty, tobacco production and offshore detention. Looking to grow your nest egg in a sustainable and ethical way? Here are the top strategies for ethical wealth creation that won’t harm the planet.
Change the way you think about investing
2016 was the warmest year in recorded history. Climate change is real, and if we don’t change our approach, we face some very real risks in the near future. But what does the economy have to do with the environment? A lot.
Ecology and economy are intrinsically linked, and we can’t buy our way out of a ruined planet:
There’s only one Earth. If we ruin it, no amount of money will help.
The ecological crisis we’re experiencing - from deforestation and acidifying oceans to more intense hurricanes and flooding - has the potential to change our lives for the worse. It’s time to rethink industry and business, and to invest strategically for a brighter future. That means a different mindset that focuses on:
- Growing wealth through sustainability
- Putting ecology first
- Investing in ethical super
- Negatively screening unethical businesses
- Emissions and carbon trading.
Growing wealth through sustainability
Fortunately, there’s ways you can continue to grow wealth without investing in dirty industries. Sustainable business models are becoming more popular every year, and with the backing of investors, could supercede their unethical competitors in the near future.
ASX estimates about $633 billion in socially responsible assets, citing businesses that care about both the environment and their public perception are also less likely to take negative risks in their business practices.
Think of ecology first
That’s the recommendation of Luis I Prádanos at Miami University:
“Mainstream economics are dysfunctional because they start from the premise that societies and ecosystems must adapt to the market economy. If we begin to organize our priorities according to the biophysical reality rather than the market’s demands, it quickly becomes clear that our dominant economic system is absurd because it destroys the ecosystems that are the source of its wealth.”
Basically, economy is a subset of ecology.
When strategising how to grow your wealth, remember that ecology should come first. Without an environment to live in, the economy won’t exist anyway. Prádanos also recommends focusing on social wellbeing rather than growth for growth’s sake. Advancing ideas like ecological economics and steady state economics could provide more sustainable, reliable wealth generation that allows you to build wealth with less risk to social well being and the environment.
Invest your super ethically
Superannuation is a great way to grow your investment, but it's essential to know how your fund uses your super.
A recent report by ABC News found that responsible investment grew by 26% in 2017 to $65 billion in Australia alone. In fact, the same report quotes Simon O’Connor, CEO of the Responsible Investment Association as saying:
"Today in Australia we see that one in every $2 is invested under some form of responsible or ethical investment strategy."
So how can ethical super funds help you grow wealth without destroying the planet? By investing your superannuation into businesses and industries that support sustainable practices, environmentally friendly manufacturing, and stay clear of fossil fuels.
We pride ourselves on being a leader in ethical superannuation investments. Check out our ethical screening process for a deeper look into the industries we support through your super.
If you’re looking to invest in successful businesses that are ethical, negative screening can help you weed out companies that aren’t up to scratch. Consider the following types of industries and whether you think they engage in ethical and sustainable business:
- Coal seam gas
- Weapons manufacturing
Clearly, the role of these industries is negative in both environmental and social impacts. As an investor, you can act positively simply by avoiding any and all businesses involved in these industries. Put your money elsewhere, and encourage others to do the same. Little by little, these industries will lose investor backing and ultimately make less of an impact on the environment.
But it’s not just industries you can negatively screen, but businesses as well. In some industries, there’s a diverse number of companies that may or may not conduct themselves ethically. Screening for these businesses can be a little more difficult, but generally you’ll want to look at:
- How the business is represented in the media
- Any works they do to help improve sustainability
- Staff happiness. Websites like Glass Door can give you insight into how companies treat their workers.
Investing in companies that care about how they do business by negatively screening unethical practices is one way you can continue to grow wealth without negatively impacting the environment.
Trade on emissions and other schemes
Some ideas are so out of left field they seem counterintuitive at first, such as trading on emissions and carbon.
The market can be a powerful driver for change. That was the realisation of Richard Sandor, the former economics professor at University of Berkeley who pioneered a number successful investment strategies including emissions trading.
While trading on emissions might seem like a hard pill to swallow for the avid environmentalist, there actually are a number of benefits for the investor (and the environment):
- First, we have to accept that companies produce emissions
- Creating a financial incentive to reduce emissions is beneficial
- Allowing investors to trade on emissions helps drive market incentive.
Other trading schemes, like the carbon trading scheme, provide a way for businesses to offset their pollution by contributing to sustainable and healthy business practices. As an investor, you can leverage just about any trading scheme to both support the environment and grow wealth.
Ethical wealth generation is possible
It is possible to invest ethically and grow your wealth without harming the environment. In fact, by investing in socially responsible business, you’re not just making a positive impact on those industries, you’re actively fighting against unethical companies. Switch to Future Super today and see how we can help you formulate a sustainable investment strategy for the future.