Techniques and Philosophy of Ethical Investing
Ethical Investing Home Page
Most investors are looking for the following from their investments:
On this web page, we will be discussing how to select ethical investments.
But it should be noted that ethical investments often
perform as well
as investments made without ethical considerations. Of course, as with any
investment, it is important that it be done carefully.
- Investments which have adequate financial returns.
- Investments which are secure.
- Investments which are ethical.
The steps needed to invest ethically can be broken down into two
parts: 1) Avoiding Unethical Investments and 2) Choosing Positive Ethical
Avoiding Unethical Investments
Some investors feel that there are no standards which can be
created for ethical investing since each individual has their own set of
values and morals. If no starndards are created, however, then even the most
harmful investments can be called "ethical" by some. Fortunately, there
are several basic values that most people share:
With these shared values we can begin to recognize what companies and
investments to avoid. There are two simple steps that can help you avoid
unethical investments based on the shared values above:
- Avoid Causing Illness, Disease & Death
- Avoid Destroying or Damaging the Environment
- Avoid Treating Honest People with Disrespect
- When judging a company/organization, focus primarily on
its products and/or services. For example, no one would "ethically"
invest in a cocaine cartel even if the leaders gave money to the poor
& sick and had won "community service" awards for those donations.
Investments in tobacco companies or
similarly unethical because many of the products they sell cause illness,
disease, and death throughout the world.
Any company or organization can take a small percentage of their
profits and give it to worthy causes. Most companies can manage to
win an award or two from some organization. These things are important,
but they pale in comparison to the effects that the products/services
have on the thousands or millions of customers. Some companies do
beneficial things with their profits. But if they make these profits
by selling products which cause illness/disease, environmental damage,
or other suffering, they are clearly unethical investments.
Keep focused primarily on the effects of the company's products and
services as they related to the above-mentioned shared values.
Here are some resources that can help you recognize companies/organizations
- When gathing information about investment opportunities, ask for
written details as to where the money is going. This is a simple,
but very important step. People who have money invested in mutual funds
or retirement funds sometimes discover that their these funds have been
invested in companies that cause widespread harm to people
or to the environment. For example, here is a
mutual funds which have invested in Monsanto.
Obtain the prospectus for any mutual funds you plan to invest in.
Examine the policies presented to see how they will invest your
money. Speak with your financial advisor to obtain more details about
which companies the mutual fund invests in.
Avoid getting caught up in sales hype. As a large number of people
choose to avoid unethical investments, it is inevitable that some
companies with name their investment opportunities with ethical-sounding
names (e.g., "green fund", "community support fund", etc.) yet still
invest in companies/organizations which cause harm. A little bit of
effort on your part will insure that your chosen investment meets your
Feel free to give your financial advisor a list of companies or organizations
that you do not want your money invested in.
Choosing Positive Ethical Investments
Now that you know how to avoid unethical investments, you can go one step
further and invest your money so that it benefits society in a
positive way. It is a wonderful feeling to know that you are
helping society and making money at the same time!
The Internet Resources for
Ethical Investing and the
Other Resources can help you get started in locating positive investments.
It is still important to examine these investments to be clear that your money
will not be invested in unethical companies/organizations, but it is less likely
that this will happen when using these resources.
Below are a couple of helpful ideas to consider:
- Keep focused primarily on the effects of the company's products and
services. This is where a company or organization can have the most
benefit -- by far. If the company's products/services promote health,
environmental benefits, or better treatment of people, then that
will usually lead to a more beneficial effect than if the company takes
a tiny percentage of their profits to promote these important social
- Make a list of other positive benefits that you would like to
see your money support. The Coop America
Socially Responsible Mutual Fund Screens details some societal
benefits from various mutual funds investments, e.g., supporting
human rights, cleaning up the environment, etc. You will probably not find
investments that benefit society in all of the ways you
would like to see. However, by looking carefully at investment
opportunities, you will likely find some investments that meet some of your
criteria for positive, ethical investments. It will give you a
great feeling to know that your money is being invested in an ethical way
that benefits society!