What is Ethical Investing?
“Ethical Investing” or “Socially Responsible Investing” is a form of investing where you don’t invest in companies that you find to be against your own personal morals. Classic “sin stocks” are tobacco, alcohol, casinos, military, and sometimes big oil and other polluters.
There has been a lot of debate about ethical investing over the years. Some people are inclined to invest only in companies that they like, while others invest in whatever companies they think will provide them with great returns regardless of what that company actually does. There are arguments for both sides, and I won’t get into them. I’m simply going to offer my view and in return ask readers for their view.
I like an uncluttered mind. I believe in aligning all activities and thoughts as much as possible, and so I personally will not invest in a company whose fundamental product or service is something that I truly disagree with. Unfortunately, just about every large corporation does things I am not fond of, and there’s really no escaping that, but I’m willing to invest in a company as long as the heart of what they do does not completely conflict with my values (especially since shareholders have the power to align the company with their values). The reason is that I don’t want to have the mental inconsistency of cheering for a company to grow (so that my wealth grows) while simultaneously hoping that fewer people use their product (for ethical reasons/a better world). What does this mean? Well, it can be gray for sure, but I do have a list.
My ethical investing list
I don’t invest in:
-slaughter houses/ meat companies
-companies largely owned by countries that don’t support adequate human rights
I don’t necessarily mind investing in:
-tasty but unhealthy food companies
-companies that sell meat as a part of their business but not as a centerpiece
-defense companies (although by an agreement, I cannot invest in most aerospace companies)
-companies known for unethical practices but for which the fundamental product or service is not against my principles (ie Walmart)
-Health care companies that face a wide range of litigation
-anything else (a given company with no notable ethical issues)
As admitted, it’s pretty gray, and I’m not going to defend against claims that there is certainly some inconsistency in there, despite my love for consistency. If I could find a company that does no wrong, well, I’ll look for some flying pigs. My overall guideline is basically that I have to be able to sleep at night with my investments.
I also promote shareholder advocacy. For companies that have a core product or service that aligns with your principles, but whose changeable business practices do not, shareholders have the power to change the values and the culture of their company, but only if enough of them decide to do so. This is also a reason why I promote individual stock ownership: I favor voting wealth to be in the hands of individuals rather than financial institutions.
This can be a pretty intense issue for some people. I would love to hear people’s thoughts in the comment section. What won’t you invest in? What’s the most evil company out there? Inversely, what’s the most ethical company out there? Will you invest in a company that does not align with your set of values?