What 'Ethical Investing' Actually Means in 2026

Walk into any bank or investment platform and you'll see the buzzwords: ESG, sustainable, ethical, responsible, green, impact. But what do they actually mean? And more importantly, which approach is right for you?

The Terminology Jungle

Let's cut through the jargon:

ESG (Environmental, Social, Governance) This is the most common term and refers to evaluating companies based on:

• Environmental: Carbon emissions, waste, pollution
• Social: Worker treatment, diversity, community impact
• Governance: Board structure, executive pay, transparency

But here's the catch: ESG doesn't mean excluding harmful companies. A high ESG score might just mean a company is "better" than its competitors—an arms manufacturer with good recycling policies could score well.

Sustainable Investing Usually focuses on environmental factors. Companies are evaluated on climate impact, resource use, and sustainability practices. Again, this often uses a "best in class" approach rather than exclusion.

Ethical Investing This typically involves explicit exclusions—refusing to invest in certain industries entirely, regardless of how well-managed they are. This is where vegan investing sits.

Impact Investing Goes further by actively seeking investments that create positive change. Not just avoiding harm, but doing measurable good.

The Problem with "Best in Class"

Many ESG funds use a "best in class" methodology. They don't exclude industries—they just pick the better performers within each sector.

This means an ESG fund might hold:

• Oil companies that are slightly less polluting than competitors
• Fast food chains with marginally better supply chain standards
• Mining companies with somewhat better safety records

For many ethical investors—especially vegans—this isn't enough. You don't want a "better" factory farm in your portfolio. You don't want any factory farms.

Understanding Screening Approaches

Negative screening (exclusion) This removes entire industries or activities from consideration. For example:

• No animal testing
• No factory farming
• No fossil fuels
• No weapons

This is the clearest approach for ethical investors. If an activity conflicts with your values, it's out—end of discussion.

Positive screening (inclusion) This actively seeks companies doing good things:

• Renewable energy producers
• Sustainable agriculture
• Clean technology
• Healthcare innovation

The best ethical portfolios combine both: excluding the bad while seeking out the good.

Engagement Some funds keep holdings in problematic companies but use their shareholder position to push for change. This can work, but it also means your money funds those companies in the meantime.

What to Look for in an Ethical Fund

When evaluating any fund claiming to be ethical:

1. Published exclusion criteria Good funds clearly state what they exclude and why. Vague references to "sustainability" aren't enough.

2. Specific animal-related exclusions (for vegans) Make sure the fund explicitly excludes animal testing, animal agriculture, and related industries—not just mentions animal welfare in passing.

3. Independence from harmful industries Some "ethical" funds are run by banks that still finance fossil fuels. Consider the broader picture.

4. Transparent reporting You should be able to see exactly what companies the fund holds and verify they meet the stated criteria.

5. Regular review and updates Screening criteria should be reviewed regularly as companies and industries evolve.

The Vegan Invest Approach

We use rigorous negative screening to exclude:

• All animal agriculture and factory farming
• Animal testing (cosmetics, household products, unnecessary pharmaceutical testing)
• Leather, fur, wool, and silk production
• Animal entertainment
• Fossil fuels and coal
• Weapons and arms
• Tobacco and gambling

We then build diversified portfolios from the remaining universe, seeking out companies with positive environmental and social impact.

This isn't "best in class"—it's genuinely animal-free investing.

The Future of Ethical Investing

The market is evolving rapidly. In 2026, we're seeing:

• More specific vegan-screened products
• Better data on company practices
• Growing demand for transparency
• Increasing regulatory requirements for ESG disclosure

This is good news for ethical investors. But it also means being more discerning—not every product labelled "ethical" will meet your standards.

Want investing that truly matches your values? See how we screen our portfolios.