Socially responsible ethical equity investments

Socially responsible ethical equity investment

By Christine Hopper

Socially responsible ethical equity investments are equity investments in businesses that that meet our definitions of “socially responsible” and “ethical”.

Remember, an equity investment is like owning part of a business. To be comfortable with your equity investments you need to be comfortable with the type of business that you part own.

Businesses excluded from ethical equity investment

The range of businesses to be considered for an ethical equity investment portfolio are subjected to both positive and negative screens. The negative screen excludes any business that manufactures or trades in tobacco products, alcohol, or armaments/weapons. Also excluded from ethical equity investment portfolios are businesses involved in gambling or adult entertainment.

Some companies operate in several sectors. A strictly applied ethical test would exclude a supermarket chain that sold liquor. A paper company that produced the cigarette papers could be excluded for contributing to tobacco products manufacture. Each equity investment portfolio manager must decide how much of a non ‘ethical’ activity would be acceptable for any company to be included in its equity investment portfolio.

Ethical equity investments have good governance

The positive screen for including a business in an ethical equity investment portfolio looks at how the business is managed and operated. A well run business complies with all relevant laws. To be considered for an ethical equity investment portfolio, a company must not exploit its employees or fail to pay proper wages.

Socially responsible or ethical equity investments

A business could be considered ‘socially responsible’ if its activities do not harm the earth’s environment. The negative screen for a socially responsible investment portfolio could exclude a business that used rain forest timbers or mines for coal.

A socially responsible investment portfolio could include casino operators and wineries. In contrast, these activities would not be acceptable for an ethical equity investment portfolio.

Both the ethical and the socially responsible investment portfolios would exclude the manufacturers and distributors of tobacco products.

Investment returns from a portfolio of ethical equity investments and/or socially responsible investments

The investment earnings from a portfolio of socially responsible ethical Australian equity investments would differ from that of the average portfolio. Over a period of at least seven years you could expect your portfolio of socially responsible ethical Australian equity stocks to generate a similar return to an unrestricted portfolio of Australian shares. But the two portfolios could have very different earning rates in for some shorter periods.
Also remember that any equity portfolio could drop in value. Your equity investment is not guaranteed to maintain its value or to pay dividends every year.

Published stock market indices include all of the listed companies covered by that index. For example the ASX200 index includes the 200 largest companies listed on the Australian stock exchange. An ethical Australian equity investment portfolio could include some but not all of the companies in the ASX200 index.

Thus the investment returns from an ethical Australian equity investment portfolio would be different from the return from a portfolio that replicated the stock selection of the ASX200 index. For example, if the market value of shares in a large gambling focused company increased substantially the ASX index could reflect that increase. But the value of the ethical Australian equity investment portfolio could not be impacted as it excludes investment in gambling related companies.

Choosing an ethical Australian equity investment portfolio

An avid investor could research every company and then choose which ones met their ethical and socially responsible standards. Investors with less research time and expertise could choose to invest in an ethical Australian equity managed fund.

The manager of a socially responsible and/or ethical Australian equity managed fund chooses the particular stocks to be included in its investment portfolio. The governing documents for a socially responsible and/or ethical Australian equity managed fund describes the SRI and ethical screens to be applied for that investment portfolio.

Two socially responsible ethical Australian equity managed funds are included in the Approved Product List for Financial Care Services. This means that Christine Hopper may recommend those socially responsible ethical Australian equity managed fund for clients. Each client needs to choose what if any ethical or socially responsible screens are appropriate for their investments.

Before you choose to invest in socially responsible ethical Australian equity managed funds seek independent professional advice.

Financial advice before buying equity investments

Before you start buying equity investments is a good time to think about the risks as well as the potential rewards. Ask an independent financial adviser about your situation before you commit to buy equity investments.

If you would be stressed or financially distressed, when your equity investment dropped 20% in value, then maybe equity investment is not for you just now. Similarly, if you are likely to need your money for another purpose within the next five years, then maybe equity investment is not for you just now.

Financial Care Services your independent financial adviser

Financial Care Services is an independently owned and operated financial adviser specialising in seniors in transition.

Independent financial advice is available regarding the investment of lump sum such as inheritances and retirement payouts. Financial Care Services charges flat fees to reflect the professional time and expertise required to advice you. Financial Care Services does not base its fees on how much money you have to invest. Call Christine at Financial Care Services on 03 9808 0338 to start your socially responsible ethical investment plan.

Christine at Financial Care Services advises seniors who are moving into new accommodation. Christine can help with strategies for investing any money released from the sale of your home when you are moving into independent living, a lifestyle community retirement village or residential aged care.

Christine can also help you understand the costs of living in your new accommodation. Centrelink could change your Age Pension rate and levy means tested fees if the family home is sold to pay for your aged care. Just downsizing your independent housing could trigger a reduction in your Age Pension.

Contact Financial Care Services for independent financial advice

Contact Christine at Financial Care Services to arrange a consultation as part of your transition planning. Remember to ask for independent financial advice before you buy an equity investment with your extra funds. That money ‘left over’ from the sale of the family home might be needed for your basic living expenses.

Contact Financial Care Services by email to receive the Financial Services Guide for Christine Hopper of Financial Care Services.

Call Christine at Financial Care Services on 03 9808 0338 to make an appointment for independent financial advice about transitioning to new accommodation.

A consultation with Financial Care Services helps you understand your potential seniors living costs together with the DVA and Centrelink implications of rearranging your assets, leasing or selling the former home.

Financial Care Services welcomes clients from Melbourne and beyond.

Assistance with completing Centrelink forms including the Commonwealth aged care means testing forms is available to clients of Financial Care Services.

Financial Care Services holds an Australian Financial Services Licence

Financial Care Services is licensed to offer investment strategy advice and to assist you to invest. Financial Care Services charges flat fees based on the time and expertise required to advice each client.  We not base fees on the value of your assets nor do we accept any commissions or payments from other service providers.

Arrange an appointment for further confidential, independent and professional advice about DVA, Centrelink, lifestyle or financial issues please contact Christine Hopper 03 9808 0338.

Disclaimer: The information contained in this website is of a general nature only and does not constitute “financial advice”. You should obtain your own personal financial advice before investing any money or moving in to any retirement village, lifestyle community or aged care facility. Financial Care Services is licensed to provide financial advice to individual clients based on their personal situations. © 2017 Financial Care Services Pty Ltd. All rights reserved.