Definition of Fair trade investing’
Investments in companies or projects that promote fair trade with producers in developing countries. Basic fair trade philosophies call for a living wage for suppliers of raw materials, goods and materials, as well as respect for strong environmental protection, and focus on trade relations between the advanced economies and developing countries.
Breaking down the ‘Fair trade investing’
Fair trade investing mainly deals with trade in agricultural products such as coffee, sugar and textiles. Many manufacturers of these products are employees with low incomes who are often marginalized in trade agreements and to get some subsidies from their governments. Fair trade practices to help the employees to a higher standard of living and financial independence, while companies that actively promote fair trade can show transparency in their business and gain valuable points image with the shareholders.
According to the world Fair trade organisation, core principles of fair trade include: creating opportunities for economically vulnerable producers, promoting transparency and accountability at all levels of the supply chain; fair trade practices do not maximize profits at the expense of small producers, insuring orders are paid or partially prepaid on receipt of documents; assists the buyers consult with suppliers before canceling or rejecting orders; prevention of unfair competition; promotion and protection of cultural identity and traditional skills of small producers; fair pay to the producers and can also be sustainable on the market; ensuring that child labour or forced labour; and non-discrimination in hiring, remuneration, training, promotion, termination or retirement based on race, caste, national origin, religion, disability, gender, sexual orientation, trade Union membership, political affiliation, HIV/AIDS status or age.
At the level of the investor
From the standpoint of investment choices, promoting fair trade, no button response. The investor must explore each company to find out their practices. Socially responsible mutual funds and other investments. Everyone can have his own definition of fair trade practices.
Common themes for socially responsible investments, such as refusing to invest in companies that produce or sell narcotic substances (eg, alcohol, gambling and tobacco) and is looking for companies involved in social justice, environmental sustainability and alternative energy/clean technology efforts. Socially responsible investments can be made in individual companies or through conscious mutual Fund or exchange-traded Fund (etf).
Keep in mind, there are two significant goals of socially responsible investing: social impact and financial gain. The two do not necessarily go hand in hand; just because an investment touts itself as socially responsible doesn’t mean that it will provide investors a good return. The investor still needs to assess the financial prospects of the investment.