Ethical Investing: Paving the Way for Responsible Investing

Learn the Possibilities and Future of Ethical Investing

ethical investing

With rising social and environmental awareness, more investors are investing to create more value in society. This is where ethical investing and socially responsible investing come into play. If, as an investor, you are concerned about the industries you are supporting, then ethical investing is the right fit for you. 

  • Ethical Investing is an investment practice that is based on moral principles.

  • The ethical investing market is subject to what one perceives as ethical. 

  • Ethical investments have shown notable growth potential.

  • Unregulated labels across the markets have created confusion among investors. 

What is Ethical Investing?

Ethical investing is a strategy wherein social values, ethical principles, and financial gains determine all investment decisions. Ethical investors aim to support industries that make a positive impact on society or the environment. People may have different definitions of ethics, which is why it is important to understand the basic concept of ethical investment in depth before making an investment. 

How to Invest Ethically?

Take some time to understand what is ethical for you before building a portfolio. Having a clear idea of what industries you want to support will make it easier for you to filter out such investment options. Besides examining the ethical standpoint, you must also scrutinise the past and present projects of the company in which you are about to invest. This will also verify the company’s commitment to all ethical practices that it claims to adhere to.

Most investors rely on environmental, social, and governance (ESG) investing guidelines to judge a particular opportunity. A high ESG score signifies the organisation’s long-term effects on environmental, social, and governance aspects. 

Also ReadTop 10 ESG funds 

Is Ethical Investment Lucrative?

While it is a new market, the popularity of ethical investing is tremendous. This growth is not merely due to public interest but also because of the exceptional performance of the mutual funds as well. Ethical investing has a lower level of risk compared to traditional funds. In fact, even in the volatile market of 2020 due to the pandemic, 25 out of 26 ESG index funds outperformed conventional funds.

What are the Concerns Regarding Ethical Investing?

There are certain obstacles and confusions associated with ethical investing, however, primarily due to certain unregulated labels. Other than ethical investing, and ESG investing, there are terms such as impacting investing, light green investing, and dark green investing that confuse people. The nature of ethical investing is subjective, so labels and funds can differ from investor to investor. Additionally, these labels make data vague, making it difficult to understand the market’s performance. 

Also Read: ESG Fund Categories


Many people believe that the whole concept of ethical investing is a façade. However, the substantial demand for responsible investments will pave the way for a big change in the way companies conduct business. The market is new and has limitations, but it has created a lot of demand and certainly, the future will come with clearer solutions and profitable opportunities. Hence, ethical investing is here to stay.

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