How to Make Money While Making a Difference
For decades, the world of investing had one simple rule: maximize profit, no matter the cost. But a new generation of investors is rewriting that rule. They’re asking a powerful question: What if you could grow your wealth and make the world a better place at the same time?
This is the core idea behind ethical and impact investing. It’s a powerful movement that proves you don’t have to sacrifice your values to build a secure financial future.
This is your beginner’s guide to understanding this exciting world, from decoding the jargon like “ESG” to finding investments that align with what you believe in.
Understanding the Terminology: What’s the Difference?
You’ll hear a few terms used interchangeably, but they have subtle differences:
- Ethical Investing (or Socially Responsible Investing – SRI): This is the original approach. It typically involves negative screening—meaning you actively exclude companies or industries that you consider harmful. Common exclusions include tobacco, weapons manufacturing, gambling, and fossil fuels.
- ESG Investing: This is a more data-driven approach. It involves positive screening, actively selecting companies that perform well on three key metrics:
- Environmental: How does the company manage its carbon footprint, pollution, and resource use?
- Social: How does it treat its employees, suppliers, and the local community? Does it have good diversity and inclusion policies?
- Governance: Is the company run in a fair and transparent way? Is executive pay reasonable? Are there checks and balances on power?
- Impact Investing: This is the most proactive approach. Impact investors don’t just avoid harm or reward good behaviour; they actively seek out companies whose core mission is to create a specific, measurable positive impact. Think investing in a company that builds affordable housing or develops renewable energy technology.
The Big Question: Do You Have to Sacrifice Returns?
This is the most common myth about ethical investing—that you have to accept lower profits to be a “good” investor.
Decades of data have shown this to be largely untrue. In fact, many studies suggest that companies with strong ESG scores can actually outperform their peers over the long term. Why? Because companies that treat their employees well, manage their environmental risks, and are governed transparently are often simply better-run, more resilient businesses.
How to Get Started with Ethical & Impact Investing in the UK
Getting started is easier than ever, thanks to a growing number of platforms and funds that do the hard work for you.
1. Invest in an Ethical or ESG Fund / ETF
For most beginners, this is the simplest and most effective route. Instead of picking individual stocks, you can invest in a fund or Exchange Traded Fund (ETF) that holds a diversified portfolio of companies that meet specific ethical or ESG criteria.
- How to find them: Most major investment platforms in the UK (like Vanguard, Hargreaves Lansdown, Freetrade) now have dedicated sections or filters for “ESG,” “Socially Responsible,” or “Sustainable” funds. Look for funds with these labels in their names.
2. Use a “Robo-Advisor” with an Ethical Option
Robo-advisor platforms build and manage a diversified portfolio for you based on your risk tolerance. Most of the top UK providers now offer a socially responsible or ethical portfolio option.
- Platforms to consider: Nutmeg, Wealthify, and Moneyfarm all have well-regarded ESG and ethical investment options.
3. Choose a Dedicated Impact Investing Platform
If you want to be more proactive, you can use platforms that specialize in impact investing.
- Platforms to consider: Triodos Bank is a pioneer in sustainable finance and offers its own impact investment funds. Platforms like Ethex and The Big Exchange allow you to invest directly in projects and businesses that are creating positive social and environmental change.
Building an investment portfolio that reflects your values is no longer a niche activity; it’s a smart, modern approach to wealth creation. By choosing to invest in the future you want to see, you can make a profit while making a positive difference.
Invest in the Future You Believe In
Your money is powerful. Where you choose to invest it can shape the world.What causes are most important to you when it comes to investing? Are you already an ethical investor and have a fund to recommend? Share this post if you found it valuable, like it to show your support, and join the conversation in the comments below!
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