The short answer? No, it’s not too late to start investing ethically.
As you get older you might think you’ve missed the boat when it comes to ethical investing. But the truth is, now is just as good a time as any to start aligning your money with your values.
What is ethical investing?
Ethical investing has many different variations, including Environmental, Social and Governance (ESG) investing, sustainable investing and impact investing. ESG looks at how responsibly an organisation operates – it considers the environmental impact, treatment of people and communities, and the quality and transparency of its leadership. Put simply, ESG is a way of choosing investments not just based on profit but also on how companies behave and impact the world.
For some, that means avoiding industries such as fossil fuels and tobacco. For others it means actively seeking out industries that are making a positive impact, such as healthcare and clean energy. It’s about using your money to reach your financial goals whilst also making sure to have a positive impact on the world.
Why it’s not too late
You don’t have to be young to get started. In fact, it can be a good thing to get started in your later years.
- You have more clarity about your values – As you move through life, you learn about the world and develop an idea of the future you think should exist. By the time you reach your 50s you may have a stronger idea of what your values are and what matters most to you.
- You’re likely to have more money – By the time you reach your 50s, you will most likely have built up some savings, investments or a pension. You may also have received an inheritance. You’re probably making financial decisions already, so it’s an ideal time to make those decisions align with your values.
- We are seeing greater clarity over what sustainable investing is – Ethical or sustainable investing used to be a very niche market, but it has become more mainstream. With the Financial Conduct Authority (FCA) introducing clearer rules regarding greenwashing and funds being able to apply for sustainable investment labels, it is becoming easier now to know exactly how and where your money is being invested.
Are sustainable funds outperforming traditional funds?
There is a common misconception that in order to invest ethically, you have to accept a lower level of return. Whilst there can be periods of underperformance, particularly if wider market returns are being driven by companies or sectors into which a sustainable fund cannot invest – e.g. fossil fuels, defence – there are also periods where these funds can enjoy strong returns. Furthermore, with the sustainable investing theme likely to be in place for a long period, we would expect these funds to have the same potential for growth as a conventional fund in the future.
Build the world you want to leave behind
Ethical investing is not just about creating wealth. It’s about helping to build a world that you want to protect for your children and grandchildren. So, if you’re asking yourself, ‘Is it too late to start investing ethically?’. The answer is no; you’re right on time.
So, how to get started?
Before you begin, it’s important to decide what ethical means to you. This is a highly personal decision, and it will look different for everyone. Start by thinking about the issues that matter most to you. Is your priority the environment? Are you more concerned with social issues such as human rights? Or do governance topics like diversity and transparency resonate more strongly with you?
By identifying your values, you can begin shaping your ethical mindset and gain a better understanding of where you want your money to make an impact.
If you’d like some support to get started, our Origen Ethical Futures advisers will be happy to help you put together a financial plan that will help your money change your world.
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