Where and how you choose to invest your money is no longer just a financial decision.
In recent years there’s been a push among philanthropists towards making more ethical, or socially responsible investments. At Brevio we love this approach.
With ethical investment you’re not just making a financial investment, you’re making an investment for the future. And ethical, or social investment has been steadily increasing in the UK over the past ten years. According to Big Society Capital, by 2019 ethical investments were worth £5.1 billion - an increase from £830 million in 2011.
It’s clear that ethical and social investment is here to stay. But with so many potential choices, deciding where and how to invest your money can feel a bit daunting. So we’ve put together our very own guide to ethical investment.
So what exactly is ethical investment?
Ethical investments are investments that have goals beyond financial return. They aim to have a positive impact on society, through incorporating environmental, social and governance (ESG) factors into investment decisions.
Put simply, it means investing your money into socially conscious, ethical and responsible organisations who have a clear mission to improve society.
For more check out the UK Sustainable Investment and Finance Association’s explainer on sustainable finance.
How does it work?
There are many different ways to invest your money. From using investment funds or wealth managers, to apps like Nutmeg, to managing your own investments.
As a philanthropist you might not consider your charitable donations as an investment, but the truth is they are, and should indeed be considered as part of your overall investment strategy.
An ethical investment works just like any other investment, but as well as (or instead of) monitoring financial returns, you monitor the investment's impact on a specific cause.
For example, you might invest in an organisation that is committed to reforesting tropical areas with native species as part of a broader strategy to combat climate change and create the conditions for biodiversity gain. You could monitor the impact of your investment by looking at how many trees were planted, what species were included, and what total area was impacted - all as a direct result of your funding.
What’s the best way to do it?
Before you start your ethical investment journey, it’s important to consider the following:
Answering these questions will help you to create an investment plan and set your goals.
Once you have clearly defined your investment plan you should consider whether you want to work with a wealth manager or investment fund, or manage your own investments.
There are pros and cons to both options. While using a wealth manager or established fund will give you the benefit of experience, managing your own investments will ultimately give you more control. And there are plenty of apps and tools to help you get started.
The Times money mentor also has some great tips on investing ethically.
How do you find the right charity?
Picking the right charity or organisation to invest in can be challenging. But working through the questions outlined above will help you find the charities most aligned to your values. You can discover causes that need support at the moment here.
You’re more likely to feel more engaged with your investment if it’s a cause you care deeply about. But choosing the right charity shouldn’t just come down to personal preferences.
It’s important to do your own research. Brevio has a suite of tools to help philanthropists identify charities to invest in. Our Insights & grant builder takes you on a user-guided journey that delivers real insights while you build your criteria, to help you identify the causes, beneficiary groups and locations in need of funding.
Our tools are designed to ensure your investment decisions are based on data, but still give you total control.
There’s many ways to invest ethically. We hope these tips will help you to get started.
Learn more about our tools for philanthropists and private donors.