Why “Doing Good” Isn’t Enough for Your Life Savings

Written By Stewart Bell

Why “Doing Good” Isn’t Enough for Your Life Savings

Many investors start ethical investing simply to avoid funding companies they disagree with. While avoiding harm is a reasonable first step, it often doesn’t give enough clarity to know if your portfolio is truly working over time.

Without clear measures of success, it’s easy to feel disappointed when markets fall or when a fund surprises you with unexpected holdings.

In our ethical investment advice, we’ve found that what “works for me” is not one simple factor. It’s a careful balance between three key elements. If you haven’t defined how much each matters to you, you don’t have a real strategy.

1. Financial Returns: The Foundation

Ethical investing is still investing. If your portfolio doesn’t meet your long-term financial goals—like sufficient savings for a comfortable retirement—it hasn’t succeeded, no matter how ethical it is.

Research from groups like the Responsible Investment Association Australasia shows ethical funds often perform as well as or better than traditional ones over the long term. However, performance depends on your choices. For example, avoiding fossil fuels might help when oil prices drop but hurts when they rise. You need to decide if you’re comfortable with that kind of fluctuation.

2. Negative Screening: The Filter

This means excluding companies involved in things you oppose, like tobacco, gambling, weapons, or fossil fuels.

Many investors stop here, but inconsistency can be an issue. One fund may exclude tobacco companies but still invest in retailers that earn some revenue from cigarettes. You need to decide whether you want zero tolerance or allow minimal involvement.

3. Positive Impact: The Direction

True ethical investing often means actively supporting companies creating positive change—like renewable energy firms, social housing projects, or healthcare innovators.

This focus can increase risk because your money may be concentrated in fewer industries rather than spread across the market.

The "Works for Me "Audit

To move beyond feeling good about your investments and build a clear strategy, ask yourself these questions:Holdings Check: Review your fund’s latest full holdings list—not just the marketing materials. If there’s a mining company or a tech firm with concerns, does the fund explain why they hold it (e.g., to push for change)? Do you agree with that reasoning?

  • The Holdings Check: Review your fund’s latest full holdings list—not just the marketing materials. If there’s a mining company or a tech firm with concerns, does the fund explain why they hold it (e.g., to push for change)? Do you agree with that reasoning?

  • The Performance Check: Compare your fund’s 5-year returns to a standard index like the ASX 200. If there’s a gap, is it due to higher fees or your chosen exclusions? Understanding this helps you accept trade-offs.

  • The Label vs Reality Test: Is the fund using ESG scores just to manage the risk to the company, or is it actually trying to improve the world? Most ESG ratings measure how much climate change might hurt a company’s profits, not how much the company is hurting the climate.

What happens if you ignore the balance?

If you prioritise "Impact" without considering "Returns," you risk a shortfall in retirement.

If you prioritise "Returns" without "Screening," you may find yourself owning the very industries you personally avoid. Success is where your values and financial goals overlap.

What you can do today

  • Review your holdings: Log into your super or investment portal account and check the full list of companies. Make a note if anything doesn’t sit right with you.

  • 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 better understand different screening methods.

Stewart Bell
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