Where Has Ethical Investing Gone?

In recent years, ethical investing seemed to be on the rise, with more investors looking to align their portfolios with their values. However, it appears that ethical investing has somewhat faded from the public discourse. What happened to this once-prominent movement and what options are out there for ethically-minded investors?

The Decline in Public Discourse

Ethical investing, also known as socially responsible investing (SRI) or environmental, social, and governance (ESG) investing, involves selecting investments based on ethical principles. This approach gained significant traction as investors became more aware of issues like climate change, social justice, and corporate governance (riaa n.d.). However, the conversation around ethical investing has diminished recently. Several factors contribute to this decline:

1. Economic Pressures: The global economic landscape has faced numerous challenges, including inflation, geopolitical tensions, and market volatility. These pressures have shifted investor focus towards more immediate financial returns rather than long-term ethical considerations (Burghof & Gehrung 2021).
2. Greenwashing Concerns: There has been growing skepticism about the authenticity of some ESG claims. Instances of greenwashing, where companies falsely portray themselves as environmentally friendly, have eroded trust in ethical investing (riaa n.d.).
3. Political Climate: The political environment, particularly in the United States, has also played a role. The anti-DEI (Diversity, Equity, and Inclusion) movement, fueled by former President Donald Trump, has led to a backlash against initiatives perceived as "woke" or overly progressive (Guynn 2025). This sentiment has spilled over into the investment world, causing some investors to shy away from ESG-focused funds.

The Anti-DEI Movement

The anti-DEI movement has gained momentum, particularly in the US, where Trump and his allies have actively campaigned against diversity and inclusion initiatives. This has included executive orders to dismantle DEI programs and pressure on companies to end DEI-related activities (Guynn 2025). The result has been a chilling effect on ethical investing, as companies and investors alike navigate this politically charged landscape (Gasman 2025).

Ethical ETF Options in Australia

Despite these challenges, there are still viable options for those interested in ethical investing. Australia offers several ethical ETFs that align with various ESG criteria. Here are a few to consider:

1. BetaShares Global Sustainability Leaders ETF (ASX: ETHI): This ETF focuses on global companies that are leaders in climate sustainability and excludes those involved in fossil fuels.
2. Vanguard Ethically Conscious International Shares Index ETF (ASX: VESG): This fund offers exposure to international companies while excluding those involved in fossil fuels, nuclear power, and other non-ethical activities.
3. VanEck MSCI International Sustainable Equity ETF (ASX: ESGI): This ETF invests in sustainable international companies and excludes those involved in fossil fuels and other socially irresponsible activities.
4. BetaShares Australian Sustainability Leaders ETF (ASX: FAIR): This ETF focuses on Australian companies with no significant exposure to fossil fuels and prioritises those involved in sustainable business practices.
5. Russell Investments Australian Responsible Investment ETF (ASX: RARI): This fund invests in Australian companies that meet specific ESG criteria.

Conclusion

While ethical investing may have receded from the spotlight, it remains a crucial consideration for many investors. By understanding the factors behind its decline and exploring available options, investors can continue to align their portfolios with their values and contribute to a more sustainable future.

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^{1. Burghof, HP & Gehrung, M 2021, Investing Ethical: Harder Than You Think. In: Minhat, M., Dzolkarnaini, N. (eds) Ethical Discourse in Finance. Palgrave Studies in Impact Finance. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-030-81596-7_8.}

^{2. Gasman, M 2025, How Leaders Are Unpacking Trump’s Anti-DEI Actions, Forbes, viewed 7 March 2025, <https://www.forbes.com/sites/marybethgasman/2025/02/23/how-leaders-are-unpacking-trumps-anti-dei-actions/>.}

^{3. Guynn, J 2025, DEI explained: What is DEI and why is it so divisive? What you need to know., USA TODAY, viewed 7 March 2025, <https://www.usatoday.com/story/money/2025/03/04/trump-dei-backlash-explained/81170427007/>.}_‍

_{4. Responsible Investment Association Australasia [riaa] n.d., Responsible Investment Explained, Responsible Investment Association Australasia, viewed 7 March 2025, <https://responsibleinvestment.org/what-is-ri/ri-explained/>.}

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_{Further Information on the Investments Listed Above}

_{BetaShares Global Sustainability Leaders ETF: https://www.betashares.com.au/fund/global-sustainability-leaders-etf/}

_{Vanguard Ethically Conscious International Shares Index ETF: https://www.vanguard.com.au/personal/invest-with-us/etf?portId=8226}

_{VanEck MSCI International Sustainable Equity ETF: https://www.vaneck.com.au/etf/equity/esgi/snapshot/}

_{BetaShares Australian Sustainability Leaders ETF: https://www.betashares.com.au/fund/australian-sustainability-leaders-etf/}

_{Russell Investments Australian Responsible Investment ETF: https://russellinvestments.com/au/fund-centre-etf/performance-pricing/exchange-traded-funds/etf/responsible-investing/rari-russell-australian-responsible-investment}

Jahanne is a Senior Investment Adviser who specialises in providing a holistic approach to wealth advice. Contact Jahanne today to discuss your investment strategy via [email protected] or 03 9947 4156.