ETHICAL INVESTING: Definition, Types, Pros, and Cons


What is ethical investing?

Ethical investing is an investment strategy in which the investor’s ethical values ​​(moral, religious, social) are the main objective along with good returns. With the rise of suspicious and illegal investment deals, many investors insist that companies make socially responsible investments. It would mean treating your employees with respect, creating healthy products and services, and staying away from unethical business practices.

Who will invest ethically?

Ethical investing is for investors who want to invest their money in charities. For example, if an investor thinks tobacco is bad, he would avoid tobacco-producing companies or invest in the tobacco-producing companies themselves.

Types of ethical investing

Socially responsible investment funds (SRI Funds)

SRI funds avoid investing in controversial areas such as gambling, firearms, tobacco, alcohol, and oil. Here, greater importance is attached to the moral value of the investor over financial returns.

Environment, Social Issues and Governance Fund (ESG Fund)

Unlike SRI funds, ESG funds consider in their decision-making how environmental, social, and governance risks and opportunities can have a material impact on a company’s performance. You can invest sustainably and achieve the same returns as with a standardized approach.

Impact funds

Impact funds also value the fund’s performance. Therefore, they aggressively try to bring about ethical changes with products and services. Impact funds are suitable for investors who are socially responsible but also want good returns.

Faith-based funds

Faith-based funds only invest in stocks that follow religious values ​​and strictly exclude investments that do not fit into this category.

Ethical investing companies


Minimum investment amount: $ 100

Socially responsible mission OpenInvest is a non-profit organization that has set itself the goal of making financial services more transparent and making socially responsible investing accessible to all.

When you invest with OpenInvest, you gain access to a comprehensive and fully diversified portfolio that you can then adjust to suit your values. This investment company supports individual and joint accounts, as well as traditional IRAs, ROTH, and SEPs, not to mention tax optimization at the individual share level, for greater tax savings.

How does it work? With this platform, you open a brokerage account, fund the account, and let OpenInvest do the rest. They can explain what is most important to you (i.e. climate change, social equality) so that your investments are directly aligned.

OpenInvest will maximize your impact measured through its online dashboard and you can join movements, participate and use the power of investors to grow your wealth directly with the market. This method also helps reduce unnecessary fees and taxes.


Minimum investment amount: $ 25,000, 0.5% annual administration fee

Socially Responsible Mission EarthFolio is a hassle-free automated investment service based on the idea that “Investing is more than a transaction; It is a personal commitment to the future. “EarthFolio invests only in funds and ETFs with strong ESG or environmental, social and governance practices. This allows you to get out of the world a little better through smart, affordable and time-efficient investments.

How does it work? Answer 10 questions about your risk tolerance and goals. Then a folder is recommended. It’s that simple that you then have a fully diversified portfolio that is automatically realigned and optimized for your specific goals.

Earthfolio allows you to open an individual or joint account, a trust account, an IRA or Roth rollover, a 401 (k) or 403 (b) rollover, or a SEP.


Minimum investment amount: No minimum balance

Socially responsible mission Ellevest was developed by women for women and offers the only investment algorithm that takes into account the unique realities of women’s lives, including salary differences and longer life expectancies. While Ellevest values ​​fair investment for women, the organization works with all adult American citizens to help them achieve their financial goals through smart investment.

How does it work? Ellevest builds an investment portfolio with a diverse mix of stocks, bonds, and alternative funds to reduce the overall risk in your portfolio. It also recommends how much you should save and help manage a 401 (k) or roll over a traditional IRA, Roth, or SEP. Impact Portfolio enables you to invest in women in leadership, sustainable practices, and community development.


Minimum investment amount: Varies by occasion

SVX, based at Socially Responsible Mission Canada, provides critical support to shortlisted companies and funds by connecting opportunities with investors who may also seek financial returns. Offers a curated selection of campaigns in the cleantech, social inclusion, health and wellness industries, and more. All products on the platform are Canadian securities for the private market.

How does it work? Investors can search for active opportunities through the platform. Once SVX is interested in an issuer and has completed the accreditation process, it will review your investment to make sure it meets your objectives. It will keep your money safe and secure and once the campaign is over, you will receive documentation of your investment if it is successful. You can use the platform to manage your investments, transact, and view the issuer’s financial history and traction.

Miraculous capital

Minimum investment amount: Investments are not currently accepted

Socially responsible mission Founded in 2013, this award-winning investment platform helps people invest in solar projects in the US.

How does it work? Wunder has a national network of large solar partners and actively manages the acquisition of commercial solar opportunities, from underwriting to contracting and construction of each project. From there, the investment platform manages ongoing relationships with solar customers and sends profits to investors. The trusted team of Department of Energy researchers and industry leaders determine which projects to pursue so your investment is diverse and well-regarded.

Advantages and Disadvantages of ethical investment

As with any decision we make, there are pros and cons to consider. Ethical investing may not be the right option for everyone, but it can be a more satisfying strategy for those who want their portfolios to better reflect their social and moral beliefs.


  • Comfort Factor: As long as the companies you invest in to share your values, you feel like you’re helping change the world for the better. When companies perform well, you have the added advantage of benefiting financially from their values.
  • Driving change: Since socially responsible companies and projects are supported by investors, other companies will try to improve their ethical behavior to raise funds. This can only be good for the environment and other important social causes.
  • Future Profit Potential: Socially responsible companies are likely to make better profits as consumer behavior shifts toward more ethical shopping. According to Nielsen statistics, almost three-quarters of millennials would pay a premium for environmental goods and services.
  • Social management can lead to better profits through a more engaged workforce: The ethics and sense of social responsibility that make us feel good about investing in SRI companies can mean a more engaged workforce. This, in turn, can lead to higher employee performance, which translates to higher profits for the company.


  • The Definition of Ethical: You need to decide what you think is ethical or responsible and then invest in companies that meet these guidelines. However, it can be difficult to find an exact match. For example, you may not want to be exposed at all to an SRI fund that includes companies that are involved in tobacco manufacturing, but the fund may have a 10% tolerance when it comes to such activities.
  • Time and Research: Ethical investing is not a passive strategy and you should spend time researching potential investments to make sure they match your values. When every investment in your portfolio has to meet certain criteria, it can get quite complex.
  • Higher fees: Due to additional research and filters associated with SRI, fees can often be higher. Higher fees can affect the performance of your portfolio and therefore underperform more traditional investments
  • Often not an optimal strategy: Investing ethically is unlikely to yield optimal returns. Therefore, the investor can sacrifice financial gain for an ethical approach.


Investors choose ethical investments when they want to make a difference in society. Your main objective when investing is to comply with your moral, social, and religious values, while the returns are secondary.

While ethical investing is good, it is an expensive strategy, requiring extensive research to find an investment that meets the investor’s primary objective. The boycott of companies will not affect them either, as a price cut will not attract unethical investors to buy the shares at a lower price.

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