Many people believe that when it comes to investing, you only need to look at the profit margin of the company. However, research and history have shown that investing with ethics in mind is the safer bet in the long run. In this article, we will examine what makes ethical investing so successful, the core philosophy behind it, and how you can start building an ethical investment portfolio. Continue reading the article below to learn more.
The Golden Rule
The golden rule is the principle that you should treat others how you would want to be treated. The fascinating thing about the golden rule and what makes it so appealing to ethical investors is that it is universally adopted, no matter religion or culture.
Fundamentally, investing in a company or ETFs is a bet on that organization’s future. An organization that applies the golden rule into its philosophy is, by nature, a safer bet than one that doesn’t. In the next section, we will examine this idea further and why following the golden rule is essential in building optimal ethical investment portfolios.
How Following The Golden Rule Leads To Successful Investments
Imagine there are two car washes operating next to each other. One spends resources on making sure no runoff chemical from their car wash reaches groundwater, while the other doesn’t. In the short term, the car wash that doesn’t spend resources on stopping chemical runoff probably has a higher profit margin.
However, the golden rule states that we want to be treated as we treat others, so a company that knowingly pollutes its local environment is subject to face numerous backlashes, including lawsuits, loss of investors, and investigations. A company that doesn’t follow the golden rule is not only unethical but unsustainable in the long run. This is why many companies are incorporating sustainability into their procedures, with varying degrees of success, and why ethical investment portfolios have become so popular.
How Investors Build an Ethical Investment Portfolio
By only adding sustainable companies into their ethical investment portfolios, ethical investors encourage companies to change their behavior and reward those who follow the golden rule. However, just because a company says they are sustainable, in practice, it may fall short. That’s why it’s important to be able to quantify the positive impact a company leaves on its surroundings.
To quantify a company’s positive impact, you must determine every aspect of a company and how it affects humankind and the planet. It’s important to understand that no company is perfect, and to function, they have to take something, ideally, they offset their negatives with more positive impact.
Building An Ethical Investment Portfolio Is The Smart Choice
As you can see, investing ethically is the safer and more successful bet in the long run. Hopefully, this article will begin your journey to becoming an ethical investor. We recommend doing further research to quantify a company’s impact and joining an ethical investor community.