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Chapter 1: What is the main topic discussed in this episode?
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Welcome to the Australian Finance Podcast, a podcast for people who want to learn more about their personal finances and get the most from their money. This series is hosted by Kate Campbell from HowToMoney and Owen Raskovich from Rask Finance.
The Australian Finance Podcast is provided for educational purposes only. The information is general in nature and does not take into account your needs, goals or objectives. What that means is the information does not apply to you specifically. So consider getting the advice of a licensed and trusted professional before acting on the information.
Kate, welcome back to this episode of the Australian Finance Podcast where we talk ethical investing.
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Chapter 2: What is ethical investing and why is it important?
So that benefits the company to have a higher share price, which they can then use for other things that they do. But there's also a distinction there with when you, what we call the first round of capital, like you put your money into the company initially. So when they do like capital raisings or private companies. But I guess...
The the most simple thing here is that you're not supporting them in either way So if you choose it to believe that something's unethical what you're what you can do is not invest in them and if enough people do that then capitalism should kick in and The money that goes that would have gone to them goes to something else that is ethical or like more socially acceptable and in that company benefits from it and not the one that you think is unethical and
But as we know, unethical companies exist, at least depending on the definition. Okay, so I've kind of bucketed it here as two ways to think about investing. One is ethical investing rather. One is to be positive or use impact investing. So we've talked about this, like encouraging people to invest positively.
In the good stuff.
In the good stuff, yeah. The things that you think make a difference for the positive to society. And then the other one is just avoid the bad stuff. So there's kind of like two sides of that coin. You can either just avoid investing in things that do bad things as a result of what they do or invest in things that you believe do the good things.
My stance is not so much to support companies that do the good things. It's more so to avoid the companies that do the bad stuff. Okay.
And the reason I think about that is because, you know, if you are investing in a company for the long term, as I do, like individual shares and when we do our research and all that sort of stuff, if you are investing in a company that is a sustainable business and consumers or businesses use its products every day and love it, chances are that company's acting sustainably.
Because if you're investing for five or 10 years, you kind of have to have that mindset. And if you're not, then it's a pretty hard way to make money. But that's kind of the way I think about it. I just avoid the big ticket items.
Yeah, so when you're looking at that positive screening approach, you might look for companies that are actively supporting Indigenous people or building... Renewable energy. Yeah, renewable energy or actively making sure that their company has a diverse hiring policy or anything like that. And you're looking at the things you'd like and you want more of it.
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Chapter 3: How can your investments make a positive impact?
And so the companies can subscribe to these principles and then choose to be vetted by them. And so that's, you know, as far as I know, it's voluntary. But that's just something you can look for. So PRI and RIAA.
They've got a pretty big website. It's unpri.org. Looks like a lot of resources on topical issues.
Yeah, they know a lot more than we do, so go there. Another one you can do, so this is aside from that, but another thing you can do if you're investing on the ASX, and most companies report this anyhow, but you can get a governance statement. So it's rules that aren't necessarily related to ethics, but more so the supervision of the company. And this is normally on their website.
And I believe, Kate, you might know the answer to this, but I believe if you list on the ASX, if you're a company that's on the ASX, you have to have a governance policy as part of your listing rules. I'm almost certain of it because some companies still have terrible listing rules. Sorry, listing compliance. And it pops up as a red flag for me. But anyway...
you can go to their website and on their investor page you'll have the governance statement or government's policy and it kind of sets out like how many people have to be on the board if they have any rules with regards to experience or diversity all those types of things because the asx kind of sets a minimum minimum hurdle yeah so that's another thing to check out and you were saying off air which is a really good point about just finding companies that are ethical and or have high governance are probably better investments anyway right
Yeah, because if they've got no sort of stringent policies on their board or their employees and there's no sort of checks and balances, then there can be a lot of risks involved there. And you want to hear they're managing the company's money as well and they're employing good people.
Yeah, and you said too, like it's probably easier to understand good governance and why you need, you know, independent directors and this type of incentive structure and all this other stuff. You're spot on when you say it's probably easier to understand that stuff than it is to like...
create a discounted cash flow analysis, do valuations, understand financial statements, all this type of stuff, right? It's probably an easy way to start investing.
Focus on the governance. Definitely. As a new investor, I'm generally looking at the more holistic issues because I don't know all the complicated methods behind investing. I'm looking at how the company impacts the country and vice versa and what do their employees think about working there and how the directors manage the company.
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