5 tips for an ethical investment in tech stocks

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Today’s people who trade on the stock market want more than just financial returns. They are increasingly opting for investments that will also have a positive societal impact.

The coronavirus pandemic has shown us that even established tech companies can suffer from short-term downturns. Apple, a tech giant, was left in shock when Chinese manufacturing centers were temporarily closed last year.

Over the longer term, however, tech stocks remain a top choice for many investors. Historically, they have dominated the global stock markets and continue to grow at a remarkable rate.

Even during the pandemic’s downward spiral, tech stocks like Zoom and Microsoft gained in value as an influx of people started working from home. The question for many investors now is: how do you find profitable investments without supporting unethical activity?

Growth in technology stocks

According to Morningstar investment advisers, technology stocks represent 24.2% of the top 500 stocks in the United States. Facebook, Apple, Amazon, Netflix, and Alphabet (which owns Google) dominate the market, with a combined value of over US $ 4 trillion.

Tech stocks are also central in Australia. We have seen the rapid rise of Australian-owned “buy now, pay later” businesses such as Afterpay and Zip.

At the same time, we have seen an increase in the number of Australians switching to ethical superannuation funds and ethically managed investment programs. The latter allows investors to bring in money (managed by professional fund managers) which is pooled for investment in order to produce collective gain.

Indirect investments through these programs are estimated to have increased by 79% over the past six years.

What is ethical investing?

While ethical investing is a broad concept, it can be understood simply as spending your money on something that makes the world a better place. This can range from companies defending animal rights to those aiming to limit the societal prevalence of gambling, alcohol or tobacco.

Although there is no strict definition of ethical investing in Australia, many managed funds and super funds seek accreditation from the Responsible Investment Association Australasia. The “ethical” aspect can be grouped into three main categories:

  1. Environment – such as the development of clean technologies or participation in carbon neutral manufacturing
  2. Social – such as supporting innovative technologies, reducing social prejudices such as poverty or gambling, promoting gender equality, protecting human and consumer rights or supporting animal welfare
  3. Corporate governance – such as the fight against corruption, the promotion of healthy employee relations or institutional transparency.

As investors, we need to be very careful with the fine print of the companies in which we invest. For example, the accreditation guidelines require that an investment fund managed excluding companies with “significant” fossil fuel connections can still include one that pays off. until a certain amount of income from fossil fuels.

So, although the AMP Capital investment manager is accredited, it can still include companies making up to 10% of their income through the distribution and services of fossil fuels.

Wind turbines in a field