A Three-Way Framework to Tell if Ethical Investing is 'Working'
Ethical investing is not just about avoiding companies you don't like. It's also about making sure your money supports the future you're wanting.
A “does this actually work for me?” check
If you already have an ethical fund — or considering one — these are three useful things to look at.:
Look at the actual holdings. Check the fund’s top 20 investments, not just its sustainability marketing. If you see a company that makes you uncomfortable, find out why it's in the fund. Some funds hold companies to try to influence them. You may agree with that approach — or you may not? ( NB Check out SIX! platform for their recent win: influencing a big Australian retailer to end its' partnership with a tech giant involved in weapons manufacture )
Check the long-term performance and fees. Compare the fund’s performance over five years or more with a broad market index, such as the ASX 200. If there is a gap, ask whether it is because of high fees or because the fund avoids certain sectors.
Understand what the label really means. ESG doesn't always mean “making the world better.” Often, it simply means the fund is looking at risks that could affect a company’s profits. That's different from actively avoiding harm or investing in solutions.
When I talk to people about ethical investing, it usually comes down to balancing three things:
1. Financial Returns — your investments still need to do their job and help fund retirement and/or other long-term goals.
The question is not “Will this fund beat the market every year?”
It's “Am I comfortable with the way this portfolio may perform differently from the broader market over time ?”
2. Negative screening : Avoiding harm — being clear about what you do not want to own, whether that's in gambling, weapons, fossil fuels, or something else.
There's no universal right answer here. What matters is being clear about your own line.
Are you looking for zero exposure wherever possible? Or are you comfortable with small, indirect exposure if the company’s main business is something else?
3. Positive impact — Avoiding harmful industries is one side of ethical investing. The other side is deciding whether you want your money to actively support businesses trying to solve real problems.
That could include renewable energy, affordable housing, energy efficiency, or technologies that reduce waste and emissions.
These things do not always line up neatly. Avoiding fossil fuels, for example, may mean your porttfolio performs differently when energy shares rise. Over-allocating your funds into a small group of impact-focused industries can also make your portfolio less diversified.
That's not necessarily a problem. You just need to know the trade-offs before you commit.
The best ethical portfolio is not always the one with the longest exclusion list. It is the one that matches your values, your financial goals, and the compromises you are genuinely comfortable making.
Next Steps
Audit your top holdings today: Log into your super or investment portal and find the "Full Holdings" list. If any company makes you uncomfortable, note it down.
Refine your strategy: Book a FREE Call to discuss how we align portfolios with personal principles without sacrificing structural integrity.
Get the data: Download your free Guide to Ethical Investing to understand different screening approaches.