🎙 This week, we’re talking about how to make a difference with your investing. Just because you’re investing to make money and build wealth, it doesn’t mean you can’t support the cause and social issues that are important to you. But how can you save the planet, support racial and gender equality while making money? 🤔
This episode discusses topics like:
- Producer: Gonzalo Araya
- Editor: Gonzalo Araya
Hello hello, friends! And welcome back to Girl on FIRE, the financial independence podcast for independent women.
My name is Priya, I’m a Chartered Accountant, an analyst and the creator of Paper Money Co.
I’m also a fierce financial feminist and the host of this podcast. I believe that a woman who is in control of her money, is in control of her life.
This week, we’re talking about how to make a difference with your investing. So, if you want to invest in companies that are led by women or people of colour or have real diversity, then this episode is for you.
If you want to invest in companies that don’t destroy the planet and are really environmentally conscious, then this episode is for you.
According to a Global Sustainable Investment Analysis by Vanguard, women and millennials are more likely to want to invest responsibly as opposed to investing in funds that only consider maximising financial returns.
But before we get started, I want to remind you to head to my website — papermoneyco.com/startinvesting to download your free copy of my Investing Starter guide
It’s totally free, you just need to enter in your email address and I’ll send it straight to your inbox.
It gives you a step by step plan to follow to get your finances ready to start investing, including working with a budget, building an emergency fund and paying off debt.
The sooner you can get your foundation set and get those good money management practices in place, the sooner you can start investing and building your wealth.
If you’re really serious about learning to master your money, then it’s the perfect guide for you, and I’d hate for you to miss out on it.
As always, Girl on FIRE is about learning, so whip out your favourite notebook or journal and get ready to take some notes.
Okay, let’s dive in!
Socially conscious investing
First, let’s go through a definition of socially conscious investing. What that means is that you’re choosing to invest your money in a way that supports various social causes that you support.
So, for example, you might not want to support a clothing retailer that manufactures it’s clothes by exploiting workers in developing countries.
They’re paying their workers cents per hour, working conditions are horrendously unsafe and workers are working for 17 hours a day.
You don’t support any of that and you don’t shop there. And the idea of investing in a company like that makes you uncomfortable.
Just because we’re investing to build wealth, it doesn’t mean that we have to be okay with making money off companies who exploit workers.
Or companies that destroy the environment or have a blatantly sexist or racist culture.
Apart from going to the polls and voting in elections, there’s no better way to make your voice heard than by voting with your dollars.
This is your chance to put your money where your mouth is and choose your investments based on your values and what’s important to you.
It might be diversity and inclusiveness within the company, especially in senior and executive management.
It could be an environmentally friendly business practices or products for consumers. Maybe it’s paying fair wages and providing safe and clean working environments.
And the fact that we have the option to do that is a privilege. And it’s fantastic, right? It gives us a chance to be the change we want to see in the world.
It’s another way we can get involved in the causes that matter to us. It’s another way that we can live and grow our wealth according to our values.
It’s a way to take a stand against how companies make money and the impact they have on the communities they operate in.
It’s also a great way to take a stand against companies that don’t have enough diversity. Never underestimate the power of voting with your dollars.
Black Lives Matter
And that’s something we saw a lot during the Black Lives Matter movement in 2020. I was getting all these emails from every company I get newsletters and sales email from.
And they were all telling me about how they’re looking at their hiring practices and their corporate culture and realising there’s not enough diversity there.
And that was also a time where more and more people were thinking twice about where they spent their money.
So, if we do that with how we spend our money, we can also try to do that with how we invest and how we make money.
FIRE & investment calculator spreadsheet
Before we move on, I want to ask my Girls on FIRE for a favour. If you’ve listened this far into the episode then you’re probably enjoying it, right?
So, here’s what I’d like you to do next. Pause this episode for a few seconds and head on over to papermoneyco.com/podcastreview.
I want you to leave a rating and review for Girl on FIRE because it helps me provide better content based on what you’re enjoying the most.
It helps other women out in the internet wilderness come and find us as well.
And it’s also a great way to support this show for free, and for that I’d love to send you a little something to say thank you.
So, once you’ve done that, take a screenshot of your submitted review and email it to me at firstname.lastname@example.org.
If you do that, I’ll send you a copy of my FIRE and investment calculator. Which, if I do say so myself, is pretty damn amazing.
It’s how I plan for my early retirement and my wealth. It shows me how my wealth is going to grow, when I can retire and how long my money will last.
And it also has a separate tab that takes Australia’s superannuation into account as well.
And you can use it to analyse companies and different investment options when you’re picking stocks too.
I’ve never actually seen anything like it before, so it’s pretty special. And I’m currently not offering that spreadsheet anywhere else except for Camp FIRE members.
Not in my shop, not to my email list — it’s a ghost. So, this is kind of a money-can’t-buy type deal.
The only way to get your hot little hands on that spreadsheet is by submitting a rating and a review, taking a screenshot and emailing it to me.
That URL again is papermoneyco.com/podcastreview. I’ve made it nice and easy for you.
So, go hit pause and do that right now. It’s okay, I’ll wait.
Okay, that concludes my little ad-break, so let’s get back to it.
How to make a difference with your investing
Okay, so now that we know what socially conscious investing looks like, how to you incorporate this into your investing strategy?
We talked about how to formulate your own investing strategy in episode 14. So, if you’re new around these parts and you haven’t listened to that episode yet, then I highly recommend you check it out.
Now to be clear here — whether or not you practice socially conscious investing is entirely up to you and what investing strategy you’re comfortable with.
It’s really a personal choice. For example, I don’t personally pick and choose where I invest my money based on my values.
I choose to make a difference in the world and live according to my values in a different way. I earn money from my investments, which include investments in large faceless corporations.
But I work for a company that has strong policies to reduce waste and carbon emissions, and has taken a stand against exploiting workers.
And I choose to make monthly donations to disadvantaged kids in developing countries. I also choose to make donations to help women in developing countries become teachers, which further helps the communities they live in.
So, that’s how I personally choose to make a difference. Socially conscious investing isn’t part of my investing strategy at the moment but it doesn’t mean that it won’t be one day.
Investing in individual companies
But if you are interested in making a difference with your investing, then how do you go about it?
If you’re investing in individual companies then you want to look for companies that match your values.
I just finished a 4 part series talking about how to pick individual stocks to invest in. it’s episodes 32 to 35. And in that series, we go through looking at financial factors and non financial factors.
But when you’re doing your research, you can add another layer of non financial factors that influence your decisions.
You can look for companies that exhibit the values and causes you want to support. For example, you can choose to invest in a company that makes environmentally friendly cleaning products.
Or a company that’s committed to becoming carbon neutral by 2025. Maybe you want to invest in a company where the board of directors is 50% women.
Or a company whose CEO is a person of colour. Or a company that values mental health so much that it gives employees free counselling and days off specifically for mental health leave.
You can really use the opportunity to look for companies that align with your specific values whatever they are.
Socially conscious ETFs
Now, what if you’re investing in ETFs instead of investing in individual stocks? We talked about ETFs in episode 17 but when you’re investing in ETFs, you’re investing in hundreds of companies at once.
And you’ll drive yourself crazy trying to make sure that all those companies align with your values and the causes that are important to you.
But luckily for us, fund managers are doing that hard work for you. You can now invest in ETFs that are a basket of companies for specific causes.
For example, there are ETFs that are a collection of environmentally conscious companies. Or companies that generate renewable energy.
And the companies in ERTH’s portfolio fall into the sectors like renewable and clean energy, green transportation, water and waste improvements, decarbonisation-enabling solutions and sustainable products.
And it actively excludes companies with direct involvement in the fossil fuel industry. So, they include companies like Tesla. I’ll leave it linked in the show notes if you want to check it out.
Another option is Vanguards Environmental, Social and Governance ETF with the ticker code ESG.
And they exclude 4 categories from their portfolio: non renewable energy like fossil fuels and nuclear power; vice products like adult entertainment, alcohol, tobacco and gambling; weapons and controversies involving labour rights, corruption and human rights.
Vanguard in Australia also has an ETF called VETH — Vanguard Ethically Conscious Australian Shares.
You’ll need to shop around a little bit because these kinds of ETFs do exist but they’re not super prevalent. It’s a new area and it’s growing, but you may be a bit limited in your choices.
But the option is there for you to start voting with your dollars if that is part of your investing strategy.
Next weeks’ episode
And that’s all I have for you Girls on FIRE today!
My challenge for you this week is to think about what causes you would want to support with your investing. How would you vote with your dollars?
On next weeks’ episode we’re going to talk about how wealthy people can still be broke.
It’s going to be a super interesting episode so you’re definitely not going to want to miss it.