Ethical Investing or Green-washing?
“I’m worried about Green-washing. We should come down on it very, very hard”
Investors who put their money into ethical investments normally do so to align their portfolio with their personal values. Companies may be tempted to exaggerate or misrepresent their ESG practices to attract investors. This is known as greenwashing and carries a risk.
Investors need to understand the difference between ethical and impact investing. This will ensure their investments make a significant impact.
This article educates readers on ethical investing. It outlines the risks associated with it. It also explains the concept of greenwashing. Finally, it provides guidance on how to make smarter investing choices.
What is Ethical Wealth Investing?
Ethical investing involves selecting companies based on certain criteria. These criteria may include having a positive impact on the environment, treating employees fairly, and operating transparently. Ethical investments are usually the first step for investors looking to align their portfolios with their values.
However, ethical investing comes with risks. One of the primary concerns is that companies may exaggerate or misrepresent their ESG practices to attract investors. This practice is known as greenwashing, and it's a genuine risk that investors must be aware of when choosing ethical funds.
Greenwashing Explained
Greenwashing is when companies exaggerate the environmental, social, or governance measures they take in their operations. Even companies that engage in unethical practices often proclaim their green credentials to attract ethical investors.
Greenwashing is a form of public relations. Its goal is to make a company look better to investors. It is not a genuine commitment to ESG.
Investors may get lured into investing in companies that do not match their values because of greenwashing. Such investments present an ethical dilemma for investors as they may unwittingly fund companies engaging in practices that they find unacceptable.
Impact Investing to Make a Real Difference
However, impact investing offers an alternative to ethical investing. Impact investing aims to match investors’ values and financial objectives while also contributing to positive economic, social, and environmental outcomes.
Unlike ethical investments, which only exclude companies that don't meet set criteria, impact investments go beyond this. They actively seek out companies that contribute to positive change. For instance, impact investment might focus on companies that engage in renewable energy, provide fair labor practices, or promote sustainable agriculture.
But how can investors know if their investment truly causes a positive impact? Analyze the fund's impact report.
It will provide detailed information about the fund's mission, the metrics used to measure impact, and its results. This is one way to gain insight into the fund. Moreover, investors must also evaluate the fund's ESG performance, transparency, and governance measures.
Sustainable Investing for Expat Wealth
Expat investment accounts do not need to sacrifice your values.
However, it’s vital to be aware of greenwashing, which can lead to investments that do not align with your moral compass. Impact investing solves this problem as it invests in the most sustainable and ethical practices via companies that drive change for the better.
Investors should also incorporate impact reporting, transparency, and governance as important considerations when choosing their investments.
Investors can make informed choices to support companies that are making a positive difference to the world, whilst benefiting financially.
The Expat Savings Account for True Impact
At The Wealth Genesis, we take time to understand our client's needs - especially with respect to the ethical preferences for their flat-fee expat savings accounts.
Many investors do not realise they may have exposure to tobacco, fossil fuels, pornography and armaments in their pension pots. This usually comes from exposure to index funds and ETFs.
We are here to help align your portfolio with your values and our expert and independent advice can help you to invest and make a real change, with real societal outcomes.
Get started today and schedule an initial consultation with a member of our advice team to learn more.
