If you’re a responsible investor looking to invest your money ethically, then you’ll know there are several ways to do so.

ETFs are one way to invest ethically, as they allow you to tailor your investment to focus on companies or sectors that meet your ethical standards. The rise in demand for socially responsible investing has also led to an increase in ETFs focusing on sustainable companies and practices.

However, choosing the right ETF isn’t always easy. There are quite a few things you need to keep in mind when choosing an ethical ETF and it can be confusing at first if you’ve not had much experience with them before.

Here is what you need to know:

1. Your Personal Values

When investing ethically, it’s important to remember that ethical investing is personal. What may be ethical to one person may not be to another. Therefore, you need to choose ETFs that align with your personal values.

You’ll want to make a list of the values that are important to you, such as the environment, human rights, animal rights, or quality of life for workers.

It’s important to note that, even if you have a value that’s on this list, you may need to be flexible in your investing. For example, while you may want to invest ethically, you may be unable to avoid investing in certain industries. Certain industries may not meet your ethical standards but may also be difficult to avoid.

2. Your Financial Goals

Investing ethically can help you reach your goals, but it’s important to make sure that your ETFs are a part of your larger financial plan that outlines your goals and their timelines. Your investment goals should be realistic and your ETF investments should help you reach them.

3. Is the ETF Transparent?

One thing to look for when choosing an ethical ETF is transparency. A transparent ETF follows strict rules and is committed to being as open and honest in its practices as possible.

Since ETFs are considered collective investment schemes, fund managers must publish their rules and operating procedures. Fund managers must also adhere to strict regulations and be subject to external audits.

4. Companies the ETF Invests In

One thing to keep in mind when choosing an ethical ETF is the companies that the ETF invests in. If a company meets your ethical standards, you can invest ethically in them through the ETF. However, if a company doesn’t meet your ethical standards, then it’s important to avoid investing in them.

You can do this by using filters that block out certain companies. Some ETFs offer ethical filters that allow you to block out certain companies. It’s important to remember that companies change over time so try and monitor diligently the companies registered in your ETF. A company that meets your standards today may no longer do so in the future.

In Conclusion

Choosing an ethical ETF is a great way to invest ethically. However, it’s important to keep in mind that investing ethically often comes with longer-term returns. So, when choosing an ethical ETF, make sure that you select one that meets your personal values and meets your financial goals. Also, ensure that the ETF is transparent, actively managed, and invests in companies that meet your ethical standards.