Saturday, November 12, 2011

Conscience Investing

Most people look at investments solely in terms of risk and return.  We analyze a company’s financials, learn about their products, read commentary and discussion about their plans for the future, and compare them to their direct competition.  It occurs to me that even those of us who have a philosophy of frugality, locality and sustainability often invest in companies based entirely on what these companies can offer us in terms of cash rewards.  Certainly, many people I know will choose not to invest in certain companies for ethical reasons, but the ones we do put money in typically fall into a category of non-offenders.  Companies like Amazon may not be doing any environmental or social harm, but are they actually in alignment with the values that we say we care about?  Are they actually moving our society in the direction that we think is ideal? 

In “Deep Economy,” Bill McKibben relates part of a conversation that he had with a green energy entrepreneur during his research for the book.  The man was having trouble finding investors, not because his idea didn’t work, but because his expected ROI was around 3%, instead of the more swollen returns that many investors are looking for.  I have no idea if that company was legit or not, but the statement stuck with me.  If I am constantly railing against the corporate attitude of profits above all else, how much of that am I, as a shareholder and consumer, to blame?  Are these companies doing anything different, albeit on a larger scale, than the person who complains about jobs being out-sourced while faithfully shopping at Wal-Mart?  It seems to me that our investments should reflect our values, even if our own returns might be less.  That or maybe we need to stop complaining so much about the macroeconomic effect that all of these small decisions add up to.

Over the next few months I will be researching how others have handled this moral dilemma, and also will be thinking more deeply about exactly what kind of company I would be proud to loan money to.  While I will be keeping my current positions during this investigation, I plan to eventually look over everything I own and review them against my to-be-determined investment requirement checklist.

If anyone has any ideas on how to get started, your suggestions would be greatly appreciated.


BNL said...

Looking forward to your results...

The most intriguing and (I think) moral investment I've come across so far is home renovation. Specifically, taking a house that is unlivable and investing into improving it. It's good for the future owner, it's good for the neighborhood, it prevents a new cheaply made house to be built (and urban sprawl), and you make a few bucks too.

Unknown said...

BNL - Thanks for the comment. I agree completely that your real estate purchase fits the criteria for a moral investment. I am looking to make a similar move in 2012.

Do you have any thoughts on buying shares in companies that you do not agree with? I am a bit up in the air on the idea for now. On the one hand, I feel like purchasing stock of a company that I disagree with is giving implicit support for their actions. On the other, unless you are buying during the IPO, the money isn't going to them anymore. Thoughts?

Debbie M said...

I agree that the money isn't going to them anymore, except if the workers get paid in stock or get access to a stock purchase plan.

On the other hand, if you write in making requests to them, those requests have more power if you are also a stockholder. Also, you get voting rights as a stockholder.

My first investments were in a an ethical fund. But their ethics and mine didn't always agree (they owned MicroSoft) and their fees were too high and the returns were low. One good thing is that they used their power as a large fund to make requests to companies, and many of these requests were satisfied.

I may (probably) have rationalized, but now I do invest in companies that I do not agree with (not as IPOs). In some ways, it's a win-win: EITHER I get some of their money that they are generating anyway to spend however I please (not on their products!) OR their price goes down (ha! they suck and their price deserves to go down!).