Ethical investing

Type_45

Is the bottom line your only driver?  Or are you unable to sleep at night unless you're under the impression that your money isn't being spent "unethically" (according to whoever decides on what is ethical within this context)?

El_Torro

This topic comes up quite often. I think, as you say, it's not easy to build a portfolio that fits to our own idea of what an ethical company should be. One way to do it would be to buy individual shares, which comes with its own downsides of course. Even then, can you be sure that the supposedly ethical company that you're investing in isn't directly or indirectly supporting unethical activities?

Personally almost all my investments are in trackers, so there's no ethical filter at all in what I'm doing.

MX5huggy

Ethics :- It’s on the radar but not the 1 st priority, as it is in general life. So in my pension 50% is in “positive impact” but I have very limited choice so it’s more away of getting a bigger spread of shares.

Kids ISA is ESG. My small ISA is just All World. I haven’t written to my DB administration demanding they divest from non ESG. I hold one individual share they are a B corp, I’m not looking for any other individual shares but if I was they would not be tobacco arms or oil. Most economic activity has a negative impact.

barnstar2077

It is so hard to even define ethical. Some people won't invest in oil companies, but how do they think everything that they buy gets to the shops?    What if the company doesn't make guns, grow tobacco etc, but does have a third party make their product in sweat shops over seas?  There are definitely ethical company tracker funds, but you would have to do very thorough research into every company to see if it conformed to your version of what is right. 

Type_45

Do ethical investments do better than 'blind' investments which are only after profit?

It wouldn't surprise me if ethical investments actually perform better for the reason of Crony Capitalism (eg, tax payers' money being thrown at green industries which otherwise wouldn't be profitable).

barnstar2077

Type_45 said:

Do ethical investments do better than 'blind' investments which are only after profit?

It wouldn't surprise me if ethical investments actually perform better for the reason of Crony Capitalism (eg, tax payers' money being thrown at green industries which otherwise wouldn't be profitable).

I agree that they are becoming more fashionable now.

El_Torro

Type_45 said:

Do ethical investments do better than 'blind' investments which are only after profit?

To answer this question probably the best thing to do is to pick an Ethical fund and a tracker and see how they compare.

Out of interest I chose ASI Global Ethical Equity and HSBC FTSE All World Index. Over the last 5 years the ethical fund has grown about 89% and the tracker has grown about 99%. If you chose two other funds then the results may vary.

I think that it stands to reason that an Ethical fund will not perform as well. Partly because fund charges tend to be higher to account for the increased management of the fund. Also some unethical sectors are highly profitable (at least for now) so it stands to reason that their shares would perform well. 

MX5huggy

I think there’s a difference between consuming a product and profiting from that product. 

Tobacco companies sell a product that kills their customers and they work tirelessly to get more customers.

I find the whole if you consume anything then you can’t have a view on reducing consumption a deeply flawed argument. If you’ve use a nylon rope to climb an oil rig to shut it down as direct action you’re not a hypocrite because you used that rope, or took a Hi 8 video recorder with you to film it. 

Type_45

El_Torro said:

I think that it stands to reason that an Ethical fund will not perform as well. 

That should be the case as they are more limited and require additional management.  However, as stated above, governments are throwing tax money at them and therefore their "profits" are enhanced at tax payer expense/subsidy. "Crony Capitalism" at work.

Prism

Its quite a complex problem. Is a tobacco company that tries to get its customers to stop smoking an ethical company even if it does that for profit? Are brewers and spirit makers unethical or not?

Thrugelmir

Type_45 said:

El_Torro said:

I think that it stands to reason that an Ethical fund will not perform as well. 

That should be the case as they are more limited and require additional management.  However, as stated above, governments are throwing tax money at them and therefore their "profits" are enhanced at tax payer expense/subsidy. "Crony Capitalism" at work.

Home REIT is a good example of a more equitable balance between shareholder returns and the objectives of the company having a social impact. Allocating a % of a portfolio to such ventures seems a reasonable balance. Far too much greenwashing and corporate greed elsewhere.