Ethical Investing

Techniques and Philosophy of Ethical Investing

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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.

The steps needed to invest ethically can be broken down into two parts: 1) Avoiding Unethical Investments and 2) Choosing Positive Ethical Investments.

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:

  1. 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 Monsanto are 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 to avoid:

  2. 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 list of 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 ethical standards.

    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:

  1. 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 benefits.

  2. 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!