Ethics and Investing

[beav80]

So, as someone on the verge of buying in to bonds, funds, and stocks, how do you reconcile your moneymaking investments with your personal ethics?
I would say that a lot of the best performing stocks involve questionable practices for the environment and people so what do you do?
Do you dissociate your financial life from your personal life, investing in oil, diamonds, or anything that performs; or do you develop your own code of investing ethics and follow it religiously?
It's a dilemma for me and I'd be interested to hear some of the ways that you have dealt with this.
And if you have a few minutes:

http://www.youtube.com/watch?v=hpAMbpQ8J7g

[jacob]

This one could really use a wiki entry. I think I answered this in another thread a few weeks ago. I forget which.

[mikenotspam]

I'd be very interested in others' opinions - I feel a similar way, beav80. I'm very comfortable being short stock, and do it regularly. That's one small way I've gotten around this issue, but as a long-term solution, I have none that's convinced me.

[beav80]

@jacob:that must get annoying, is it worth a blog post? I would like to read that.

[jacob]

There already is a blog post. See

viewtopic.php?t=355
(that's not the thread I was thinking off, so there's at least one other thread)

[slacker]

@jacob: your definition of speculation vs investing is perfectly valid here too...I can't remember the exact text.
With most people it seems to be this: What I'm doing is ethical, and what you're doing is not.

[simplex]

For me ethics in investing plays a major role. With ERE as a goal I also have an ideal on how society should/could develop.
I see investing and gambling as something similar: you bet money on something and hope for a decent return. So I have no ethical problems with that.
In practical terms that implies for me that I will preferably invest in:

- green loans through a bank

- companies I consider ok (a bit vague)

- government bonds of democraties
I preferably don't invest in:

- defense, because I think the sector has too much influence on government. I think defense is needed, but not the bribing.

- tobacco, this industry has a track record of distorting the truth on the link between tobacco and illness. However if this industry were clean on the risks I could invest.

- nuclear, I think it thrives on externalizing the cost for nuclear fuel disposal.

- monopolizing companies, like syngenta and apple. I think they thrive for part on claiming ideas as theirs through patents which I consider unjustified.
As you can see these things are quite personal. e.g. if I personally don't use an iPhone because it restricts my freedom and sends all my data to apple, why should I invest in it?

[Rob A.]

Might be my intro post here, where Jacob offered some thoughts: viewtopic.php?t=1675

[raider]

Just a thought to add to the discussion. Isn't the quest for socially responsible investing playing in a similar dimension as the discussion about "needs" and "wants"?
I hardly doubt that an satisfactory objective assessment is even possible. One may probably reach a consensus on the floor of socially responsible investing by not investing in these guys ( http://www.africancapitalmarketsnews.co ... -ventures/ ), but almost anything else in the spectrum seems uncertain.
Lets put some fuel in the discussion; is anyone aware of John Perkins - Confessions of an Economic Hitman?
Lets say I buy US treasuries. Among financing all the good stuff, I can probably not prevent that some funds end up being spend in such ventures: http://www.youtube.com/watch?v=yTbdnNgqfs8
Anyone else has thoughts or opinions in that direction?

[Chad]

Raider is correct. It is impossible to avoid all the unethical investments and still make money, as any company of any size is interconnected with all the others. For instance, you can't buy GE at all, as they make something for everyone (Defense, tabacco, pharma companies, etc.), though they don't directly make many unethical products and make some very good ones in other cases (windmills).
Just the act of buying stock/bonds forces you to pay a broker fee. At least a part of this fee will end up in a "big bank", as they are the market makers. Thus, you will have funded some form financial chicanery (love that word).
Given this and the fact that the amount anyone is investing on here is very miniscule for these companies (Northrop Grumman probably misplaces a few million a day) it doesn't bother me in the least to buy tobacco, defense, etc.
Of course, I would gladly vote for defense cuts, higher tobacco taxes, etc. The dichotomy doesn't bother me. In some ways it would be even more satisfying to make a fortune off of tobacco companies and then fund an organization that helps cut it's use by half.
I will second the recommendation for the Confessions of an Economic Hitman. Very easy and interesting read on the "game" played by countries and very large companies.

[Mo]

@beav80, Ethics in investing could easily be several books, perhaps it is... explaining one's justifications fully would be a long and foolish task (foolish because as soon as you explain things in such detail you'll likely become more open to criticism, not less, and to what end?).
Similar to the old Rush song lyric: "If you choose not to decide, you still have made a choice." It would seem hard to have anything of value without having invested something. As you turn away from one investment and toward another, the distinction between more and less ethical may be difficult to discern.

[George the original one]

Overall, it is a very personal choice. For myself, if company is not being straight-forward about their products/services, then that is unethical and the behavior likely spills over into their finances.
Tobacco is the single industry that uniformly lied about their products, thus I won't invest in tobacco companies.
Energy, resource mining, and defense industries seem to have varying levels of truthfulness about their products/services/consequences. Consequently, I feel free to pick & choose companies from those industries.