Fair Trade Investing – Definition

Cite this article as:"Fair Trade Investing – Definition," in The Business Professor, updated July 30, 2019, last accessed December 4, 2020, https://thebusinessprofessor.com/lesson/fair-trade-investing-definition/.


Fair Trade Investing Definition

Fair trade investing is a method of investment that places value on promoting fair trade with suppliers of emerging countries. In this form of trading, an investor only purchase or sell from and to companies that enhance fair trade in developing nations. Ethical environmental practices and fair trading between developed and developing nations is fostered. The Fair trade investing is regarded as an investment philosophy that is socially responsible. It seeks to improve the standard of living of producers and suppliers of raw materials.

A Little More on What is Fair Trade Investing

Producers and suppliers of agricultural products such as cocoa, coffee, sugar, cotton and textiles occupy the center positron in the Fair trade investing philosophy. Basically, the fair trade investing philosophy advocates an improved standard and a good living wage for producers of these products. The reason for this is that many trade agreements have little or no consideration for these suppliers and growers of agricultural products. Many of them are low-income workers and get minimal subsidies from their regional governments.

Fair trade investing gives room for companies that practice it to enhance financial independence for producers in developing nations. These producers achieve an improved standard of living.

Principles of Fair Trade

The World Fair Trade Organization outlines the basic principles of fair trade investing. These principles inform the pattern through which fair trade is operated. They include the following;

  • Stimulating accountability in the supply chain for agricultural products.
  • Ensuring that small growers and producers are not marginalized.
  • Creating opportunities that will improve the standard of living of marginalized producers.
  • Promotion of skills among small growers and producers.
  • Ensuring the payment for ordered goods upon receipt.
  • Reducing unhealthy competition drastically.
  • Kicking against child labor, discrimination in payment and recruitment of workers, unlawful termination of employment, among others.

At the Investor Level

Investors can also participate in fair trade investing, this means investments are carefully selected and companies to invest in are socially responsible and must support fair trade. This is called a socially responsible investment. Socially responsible investments can be made using mutual funds and ETFs.

Fair trade investors do not invest in companies that manufacture products that have no social responsibly such as gambling companies, tobacco producing companies, among others. Companies that these types of investors look out for are those with social impact and responsibility such as environmental impacts, technology innovations, social justice and many others.

References for “Fair Trade Investing”

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