WWYD: Do Ethics Have a Place in Investing?
@ 4:47 amEthical investing. Faith-based funds. Socially Responsible Investment funds. To what extent do your ethics impact where you stash your cash?
“I care about these people’s spiritual lives” says Bolt Moore, an American pastor currently based in Budapest, “but I know they live in the real world. I believe that doing business is a part of life and that there’s an ethical way of doing business that’s compatible with one’s spiritual beliefs.”
Really?
According to the Guardian there are 69.5 million Americans “devoted to the evangelical lifestyle,” many of whom have also devoted $17 billion to companies whose world-view and standards of morality match their own.
The largest of the funds appealing to the Christian right is the Ave Maria Catholic Values Fund …
It has $600m in assets under management and it specifically excludes companies that fail to “take a pro-family approach to investing”. That means they have no truck with firms “connected with abortion or pornography, or that offer their employees non-marital partner benefits” [that would be us, homos]. Pepsi’s decision to provide healthcare coverage for unmarried couples resulted in it being dumped from the fund in 2004. Pharmaceuticals giant Eli Lilly suffered a similar fate last year.
Others are even more overt:
… the Timothy Plan family of funds … Their goal is to “recapture traditional American values”, which means no messing about with companies that contribute to the “moral decline of our culture, through their involvement in abortion, pornography or active promotion of the homosexual agenda”…
The fund recently chastised car giant Ford for “promoting homosexuality over shareholder profits” and linked the company’s record $12.7bn loss in 2006 with its sponsoring of a Gay Pride festival. Ally protested that the firm had “turned its back” on ordinary Ford drivers.
The article says there’s a potential 4 trillion Christian dollars swimming around out there in various mutual funds. And if its power is one day collectively realized? That’s some pretty hefty lobbying force.
Faith-based investors aren’t alone on their journey to keep their money in line with their eternal life/karma/conscience.
Ethical and Socially Responsible investing both involve screening companies in order to identify whether they match any given set of ethical criteria; screening services also provide information on social and environmental impacts of the companies.
Ethical funds run the gamut of trendy causes, from weeding out war supporting industry to sweat shops to tobacco. Nina addressed these in a post last year. Socially Responsible funds aren’t quite that dogmatic; they’ll take on a company with inferior ethics if it has all around good business practices.
Climate change funds are pretty self-explanatory. And, according to the Economist,
On March 17th the first carbon-linked derivatives contracts will begin trading on the Green Exchange, a joint venture between the New York Mercantile Exchange, Evolution Markets, a broker, Morgan Stanley, Merrill Lynch and others…
…with the science of climate change no longer widely disputed and all three remaining presidential candidates in favor of bringing a … cap-and-trade system to America, Wall Street is taking the environment a lot more seriously. The potential rewards are huge. New Energy Finance, a research firm, thinks the American market for carbon emissions could reach $1 trillion by 2020…
The big banks are looking to dump into climate change as well:
Citigroup has pledged $50 billion to green initiatives over ten years, including $31 billion for clean technologies. Bank of America (BofA) has made a $20 billion commitment. Alone among big banks, it has also said it will put a price on carbon dioxide (of between $20 and $40 per ton) when scrutinizing loan requests from industry. Citi, JPMorgan Chase and Morgan Stanley recently unveiled a set of “carbon principles” that will tighten financing terms for smoke-belching power plants.
Is money following ethics or vice versa? Do you care? Does someone else move your dollars around for you, and, if so, what (if any) are their ethical investments? Do they take yours into account?
March 14th, 2008 at 7:05 am
I believe that if everyone does invest according to their personal values, then, since so many of core values are alike — and are supportive of higher ideals — that in the long run, only companies employing these higher values will truly prosper.
Incidentally, I’ve been following ethical investing for about forty years. For readers interested in the latest ethical and green investing news, they might find my site quite helpful. It’s at http://investingforthesoul.com/
Best wishes, Ron Robins
March 14th, 2008 at 7:40 am
Thanks Ron. Great website! Many “ethics” are pretty straightforward and obviously beneficial to all, but what about the more subjective “ethics”? If everyone invests ethically, won’t someone’s ethics end up infringing on other’s rights/lives (ie. if that $3 trillion all went into the Timothy Plan funds)?
March 15th, 2008 at 11:30 am
Hi Aundi. This is something I think a lot about. Putting my own money into socially responsible investments is a no-brainer for me, just because I personally don’t feel ethically comfortable doing otherwise. But I also try to convince others to do the same through my blog– and I’ve definitely thought about “Hmm, if I convince some Christians to combine their money and their values, they may avoid the very same LGBT-friendly companies that I am trying to support with my money.”
But after wrestling with it, I decided that I think keeping money and values separate is one of the biggest problems in our society– the idea that the economy (which obviously has a huge impact on people and the planet) should have nothing to do with what we want out of society is a big obstacle to changing society for the better. I want that culture to change, and for me doing so is worth risking that people whose values oppose mine start advocating those values with their money.
Besides, I think/hope they are on the losing side of history, on LGBT issues and others, so hopefully over time their impact will shrink rather than grow. Before long, they won’t have any companies left to invest in who don’t offer partner benefits, etc…
March 16th, 2008 at 11:20 am
PN, your website is a wealth of information! I would especially recommend the Socially Responsible Investing Series to any readers looking for more information.
I have to say that the link at the end of part 4 to the Milton Friedman 1970 New York Times article , declaring that the only social responsibility of a business is to increase profits, offers an interesting point of view in today’s economic/political climate. I’m not saying that I completely agree with him. However, while reading your posts, I was thinking about how close socially responsible investing is to tithing, while conversely, Friedman’s article posits that socially responsible investing gives businesses the governmental function of “the imposition of taxes and the expenditure of tax proceeds.”
He goes on to say that socially responsible investing ends up granting businesses the advantaged positioning of being legislator, executive, and jurist; and while he labels this as undemocratic socialism, he does grant that many people might see “the exercise of social responsibility by busi¬nessmen is a quicker and surer way to solve pressing current problems.” That makes socially responsible investing seem a bit revolutionary.