We all want our investments to be sustainable and protect human rights, but it’s not always easy to tick every ethical and environmental box. Finanzdiva shares her top six things to consider when making ethical investments.
- Cost: Active management costs money, because eco-funds require checks by external consultants and ethics committees.
- Risk: Managed environmental funds often invest in smaller small cap companies, whose credentials are easier to review. But smaller companies run a higher risk of insolvency, and small-cap stock prices fluctuate more strongly compared to large internationals. Plus, their tradability and liquidity are lower.
- Seal of Approval: Self-proclaimed ethics committees include Triodos Bank and external auditors. The FNG Siegel is regulated by the Forum für nachhaltige Geldanlage (Sustainable Investment Forum).
- Diversification: A portfolio of purely environmental investments is not sufficiently widespread.
- Renewable energy: renewables are considered top candidates in the sustainable area, however, wind energy production is not particularly animal-friendly. The solar industry provides peace of mind for investors, but often disappoints with low returns. Investment risk in the energy sector is high.
- Marketing: Beware of greenwashing; the “eco-product” label is often used as a marketing method.
Kat€’s top tips:
- Before you invest in sustainable products, consider the returns.
- Compare the cost of the products offered (including order fees, sales charge, etc.).
- Seals like FNG indicate a sustainable product – then you don’t have to check yourself for ethical criteria.