In the world of socially responsible investing, you may come across many relatively new terms. At some point, you may even wonder what ethicality means and what it has to do with your investing strategy.
Obviously, you want to invest in ethically bound companies because they typically are the most socially responsible. The problem is that it can be difficult to define what ethicality means in the world of business so let’s explore that.
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Ethicality at Its Core
Ethicality at its core is the concept of acting ethically, whether personally or in business. Businesses that practice ethicality consistently strive to make ethical decisions about how they do business and how their business affects the world around them.
Businesses that understand what ethicality means and how it affects the practice make decisions that positively impact their employees, their customers, their stakeholders, and the world around them. In terms of what ethicality means, the positive impact includes potential profit, the way they do business, and the way their business impacts society.
What Ethicality Means When it Comes to Investing
Individuals first choose to commit to ethicality as an investment strategy. This decision reflects the will to create an investment strategy that truly reflects what ethicality means so they’ll want to reserve their investments for companies who practice the highest ethical values.
Filling an investment portfolio with companies who understand and practice what ethicality means isn’t easy and some people choose to partner with an ethical investment firm. This broadens the parameters because finding an investment firm that only handles ethical investments can be difficult since the traditional model only requires companies to turn a profit for stakeholders.
Investment firms who understand what ethicality means comprehend that the companies they invest in are bound by the guiding principle of a positive impact. Therefore ethical investment firms only invest in ethical companies.
An Example in the Absence of Ethicality
Say for instance an individual makes an investment in a tobacco company and that tobacco company turns a huge profit making that individual and sizable return. That individual never smoked but someone else in their household did.
Several months later, the same individual develops cancer from secondhand smoke. The individual invested in a profitable company who did not understand or practice what ethicality means. While that person may have created value inside their portfolio, the value was destroyed in other areas of their life.
Had this person invested in a company that practiced what ethicality means, they could have created value not only in their investment portfolio but also in other important parts of their life.
Also read: Precious Metals Investing for Beginners
Ethicality Means Investing in Socially Responsible Companies
Understanding what ethicality means and applying it as an investment strategy is the principle of investing in socially responsible companies that have a positive impact on the world around them. When people consistently choose investments in companies who practice what ethicality means, it starts to change the way other companies do business. It can be the catalyst for social change that benefits society. What ethicality means in the world of investing is opting to do business with companies that improve the world around them.