Sustainable Investing 101: How To Determine if a Fund is Ethical

For many investors who want to align their investments with their personal values, the search for an ethically run fund is on. Although ethics plays an important role in every investor’s decision making process, it isn’t always the first thing that pops into your mind when evaluating a potential fund. 

There are many different considerations when it comes to investing your money and finding a fund that aligns with your personal values can be difficult. But with the right combination of knowledge, diligence and research, you should have no trouble finding an ethical fund that meets your needs. 

Here are some steps you can take to determine if a fund is ethical.

Use Screening tools

There are several screening tools available that can help you find funds that meet your ethical values. 

The Ethical Investment Research Centre, for instance, offers a free screening tool that allows you to select key criteria and find funds that meet your needs. Additionally, Morningstar offers an ethical fund screener that allows you to select a variety of criteria to find funds that meet your needs. 

These tools can help you identify funds that meet your ethical values and allow you to narrow down your search based on your personal needs. Once you’ve identified funds that meet your needs, you can start digging deeper into each fund and determine if it’s a good fit for you.

Research the Fund’s Holdings

One of the best ways to determine if a fund is ethically run is to examine the fund’s holdings. You can do this by obtaining a fund’s most recent portfolio and reviewing the positions. This will give you an idea of the types of companies that the fund invests in and the industries they operate in. 

If the fund is listed on a public exchange, you can request a copy of the fund’s latest portfolio from the fund’s manager. This will allow you to research the fund’s holdings on your own. If the fund is privately held, you may need to contact the fund’s administrator to request a copy of the fund’s portfolio.

Look at the Fund’s Manager

The fund manager is an important person to be aware of when selecting an ethically run fund. After all, it’s the fund manager’s job to oversee the investment process and make sure the fund’s money is being put to good use. 

If the fund manager is running a fund ethically, you will see it reflected in the fund’s portfolio. It will have invested in companies that operate ethically, adhere to high standards and have a positive impact on society as a whole.

Check the Fund’s Record of Returns

Ethically run funds aren’t guaranteed to outperform the market, but they should be generating positive returns over the long run. You can determine if the fund has been consistent by reviewing its track record. 

The fund’s annual report should have the track record information. After reviewing the fund’s track record, you can determine if it has generated consistent returns over a long period of time. 

Hire an Investment Adviser

If you find yourself still struggling to find an ethically run fund that meets your needs, you may want to consider hiring an investment adviser. 

A good investment adviser will help you select a fund that meets your ethical needs. And while an adviser will charge a fee for their services, it may be worth it if it allows you to invest in a fund that meets your ethical standards. 

In Summary

Finding a fund that meets your ethical standards may be more difficult than finding a non-ethical fund, but it’s worth the extra effort. After all, you want to be confident in your investment decisions and know that your money is being put to good use. 

All you have to do is follow these simple steps and you’ll be well on your way to finding the ethically run fund that’s right for you.

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