Today’s investors are more aware of climate change now than ever before, especially following regular media coverage and global protests. With both investor and media interest peaking in regards to the protection of the planet, more investors are looking into investment opportunities that are both ethical and responsible.
If you are one of the many who want to gain exposure to stocks and other assets while having a positive impact on the planet, investing sustainably and ethically could suit you. In 2019, investors contributed around €120bn into sustainable investment options, a drastic rise compared to the following years. Join us while we review the differences between investing sustainably and ethically. Following this, we count down the best ethical investments by their ethical goals and cover how to gain exposure to ethical and sustainable shares. This information is up to date as of February 2021.
Although sustainability is classed as an ethical issue, there are some differences between an ethical investment and a sustainable investment.
Ethical investment involves choosing stocks, shares and other assets based on moral principles. Therefore, each investment decision should consciously align with investors ethical beliefs. Ethical investment is also known as socially responsible or conscious investment. An ethical investor should avoid ‘sin’ stocks such as companies that profit from cigarette smoking and alcohol production, and instead look for companies that follow strict ethical guidelines.
Sustainable investment, however, involves choosing stocks and shares or other assets based on their ability to have a long-term positive societal impact. One example is investing in water stocks of companies that deal with water waste management. Sustainable investments can refer to companies that want to solve the world’s challenges and create a more sustainable future. Although, it could also refer to blue-chip companies with sustainable initiatives that exceed their competitors.
Many investor’s perceptions of ethical investing have changed over the last decade. Transitioning from investing in companies that simply do little harm to the environment, ethical investing now involves actively seeking companies that are committed to positive environmental, social or ethical change. With ethical investors paving the way for new types of ethical investment, the below companies are compiled based on their potential to create positive change, whether in an environmental, social or ethical sense.
Since its inception in 2003, Tesla has pioneered the electric car market and achieved the rank of the global leading producer of electric cars. Besides Tesla’s prominence in the electric car market, the company also has invested heavily into renewable energy via its subsidiary – Solar City. If successful, Tesla has several methods of creating positive ethical change, but namely electric vehicles, autonomous vehicles and renewable energies. Read more about Tesla's share price.
Organic farming removes the use of pesticides, herbicides and insecticides. The result is a product that is more sustainable as many chemicals used in non-organic farming can damage the soil, increase waste, or stay on the product resulting in a less environmentally friendly product. United Natural Foods are a wholesale distributor of healthy foods. Besides this, the company has many ethical initiatives such as investing in renewable energy and philanthropic activities. Read more about United Natural Foods' share price.
Weyerhaeuser is an American timberland company and owns tens of million acres of land across the US and Canada. It may be strange to see a company that is based on chopping down trees in an ethical and sustainable stocks list, but Weyerhaeuser practises sustainability in its forestry efforts by planting over 1bn trees in the last 10 years and plans to plant many more. Additional to this, the company maintains a clear ethical stance with its commitment to responsible energy and clean energies. Read more about Weyerhaeuser's share price.
There are several methods investors can use to gain exposure to ethical companies, these include ethical shares, ETFs, funds and share baskets. When trading shares, ETFs or share baskets with us, you will be using a feature known as leverage. Leveraged trading magnifies your profits and losses, which can result in more risks.
Ethical shares such as Tesla, United Natural Foods and Weyerhaeuser can be accessed on our trading platform. Investors can choose to either ‘buy’ and go long, or ‘sell’ and short ethical equities. As our trading platform gives access to both sides of the market, you can also use the option to short an asset to offset market risks.
ETFs like the iShares MSCI KLD 400 Social ETF can be accessed via our trading platform and work in a similar method like ethical equities above. Investors can choose to go long or short. Trading exchange-traded funds helps to provide exposure to several assets, unlike a stock, which only provides exposure to a single asset. This can provide several benefits, including lower trading costs and diversification. Remember that leveraged ETFs are complex financial instruments that carry significant risks. Certain leveraged ETFs are only considered appropriate for experienced traders.
Although we do not offer share baskets specifically for ethical stocks, we do offer a share basket for renewable energy stocks, which is directly related to ethics and sustainability. Share baskets are mini portfolios of stocks built around a specific theme and provide exposure to several assets that are handpicked by our traders and market analysts. We sift through data on popular themes and growing trends in the markets and handpick stocks to give you maximum exposure to those themes with a single position. Read more about our exclusive share baskets.
CMC Markets is an execution-only service provider. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although we are not specifically prevented from dealing before providing this material, we do not seek to take advantage of the material prior to its dissemination.