Is ethical investing a no brainer? 5 Questions to ask your financial adviser

Ethical investing—also referred to as sustainable, socially responsible, or ESG (Environmental, Social, and Governance) investing—has grown rapidly over the past decade. 

More investors are seeking to align their portfolios with their personal values, ensuring that their money not only generates financial returns but also supports causes and practices they believe in. 

This approach goes beyond simple profit; it considers the environmental footprint of companies, their treatment of workers, governance structures, and broader community impact.

For many, ethical investing feels like a “no brainer”: why wouldn’t you want your investments to reflect your principles? However, ethical investing is not a one-size-fits-all solution. It requires clarity, thoughtful questioning, and a solid understanding of how these strategies fit into your broader financial goals.

Below are five essential questions to ask your Financial Adviser to help you decide whether ethical investing is the right path for you.

1. How do you define ethical investing?
   Not all advisers or fund managers interpret ethical investing the same way. Some focus narrowly on excluding industries like tobacco, gambling, or fossil fuels, while others adopt a more proactive approach—investing in companies leading in renewable energy, gender diversity, or sustainable farming. Asking your adviser how they define and implement ethical investing will clarify whether their approach matches your values.

2. What screening methods are used in selecting investments?
   There are two main approaches: negative screening (excluding harmful industries) and positive screening (actively selecting companies that demonstrate strong ESG practices). Some funds use both. Understanding the screening criteria helps you see whether the portfolio aligns with your expectations—for instance, whether it avoids companies you strongly oppose or actively supports those you admire.

3. What impact does ethical investing have on returns and risk?
   One of the most common concerns is whether investing ethically means sacrificing performance. Evidence suggests that many ethical funds perform on par with or better than traditional investments, particularly as the world shifts toward sustainability. Still, it’s important to ask your adviser about potential risks, diversification, and how an ethical strategy might impact your long-term goals.

4. How do you measure and report the social or environmental impact of my investments?
   Beyond financial returns, many investors want to see evidence of real-world impact. Ask your adviser how they track and report on ESG outcomes. Do they provide transparency on carbon emissions reduced, communities supported, or improvements in governance standards? This accountability ensures your portfolio is delivering on both financial and ethical fronts.

5. What investment options are available to me within ethical frameworks?
   Ethical investing doesn’t have to be limited to a single fund. You might have access to a range of options: exchange-traded funds (ETFs), managed funds, superannuation products, or direct share portfolios that follow ESG principles. Discussing the breadth of options with your adviser will help you understand the flexibility available to balance your ethical preferences with diversification needs.

Final Thoughts

Ethical investing offers a powerful way to ensure your wealth creation reflects your values. For some, it’s a straightforward decision; for others, it requires careful consideration of trade-offs, definitions, and impact. By asking these five key questions, you’ll be better equipped to determine whether ethical investing is truly a “no brainer” for you—or whether a tailored approach is needed to strike the right balance between values and returns.

If this article has inspired you to think about your unique situation and, more importantly, what you and your family are going through right now, please get in touch with your advice professional.

This information does not consider any person’s objectives, financial situation, or needs. Before making a decision, you should consider whether it is appropriate in light of your particular objectives, financial situation, or needs.

(Feedsy Exclusive)