What is ethical investing? MintGenie explains

Investors and fund managers are increasingly looking for businesses that are socially responsible and financially viable in order to meet current ethical investment standards.

Ankit Kedia, MintGenie Team
Published9 Jul 2023, 11:04 AM IST
Ethical and socially responsible investments (SRIs) will be the base on which all investment decisions will be made in the future.
Ethical and socially responsible investments (SRIs) will be the base on which all investment decisions will be made in the future.

Businesses across the spectrum, irrespective of their industry type, size or location are now intertwined with the communities they operate in. The need to ethically invest in enterprises that are socially responsible has now gained precedence over the single-minded ROI-driven decisions of yesteryears.

Ethical investing necessitates the integration of a business’ social, environmental, and community impact. By doing so, it contributes to a better world for living and motivates founders to work for sustainable growth solutions. Moreover, it also enables the investor to get good returns.

One of the biggest avenues of ethical investing where profits need to be balanced by considerations of social obligation, is the fight against climate change. Climate change events are causing significant loss of lives and property annually, and there is a concerted effort now to make investments in technology development that can mitigate these threats in the years ahead.

Similarly, another key concern area is the proliferation of products that are not clean and nature-based or nature-friendly are adversely affecting the environment and health of consumers. As an investor, even when securing investments and generating ROI is still the top priority, one can no longer overlook such social and ethical needs.

Well aware of the changing times, and the need for ethical investing, investors and fund managers are increasingly seeking detailed information related to the environmental impact of the business before making investments.

In such a scenario, business founders seeking investments need to first ask some pertinent questions to themselves. These may include:

  • What is the current investment sector outlook?
  • What are investors looking for before investing in the sector that we operate in?
  • Is the business on the right side of social responsibility and sustainability parameters? If not, what all can be done to make it a socially responsible and financially viable investment option for the investors.

The investor perspective

With the world becoming increasingly interconnected, it is important for business leaders to show accountability for the funds. Further, investors themselves aim to avoid corrupt practices, or support companies that don’t support fair pay, diversity, inclusion, and sustainability of operations. The traditional ROI-oriented model of investment is passé .

As the world prepares for daunting future challenges such as climate change, integrating ethics or social responsibility into the investment criteria is going to be a long-term self-goal for most investors. Governments all over the world, especially in India are now taking up the cause of sustainability seriously.

Corporate social responsibility is not something that is being left alone as a voluntary act by businesses, but governed through ESG frameworks and considered a social obligation. The social responsibility valuations of a company can be crucial in enhancing market reputation among equally potent brands, and also in swinging investor decisions in its favour.

Conclusion

Ethical and socially responsible investments (SRIs) will be the base on which all investment decisions will be made in the future. There is enough momentum being built, and investors are already shirking away from ‘profitable’ opportunities that risk a decline in public goodwill and also pose a chance of future compliance issues with new green legislations.

Since the arena is going to be the only playing ground for investors and businesses alike in another couple of decades, it is imperative to make the change now, and secure the planet’s future alongside the early bird advantages!

Ankit Kedia, Founder & Lead Investor, Capital A

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First Published:9 Jul 2023, 11:04 AM IST
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