Ethical Investing: A Matter of Conscience

Investors with enough time and perseverance can check out a company’s ethical principles for themselves when deciding to invest, but the majority of investors rely on the information made available to the public by the company, trusting that it is accurate. Also, investors need to analyze exactly what they consider to be ethical and whether they are being consistent in upholding their own ethical principles regarding the products and services they make use of in daily lives. For example, would ayou reject investing in a major supermarket chain that has no social responsibility program, yet shop at one of their stores because it’s convenient? Are you against animal testing, period? Or do you think animal testing is warranted for medical purposes? Would you boycott all the products made by a company that uses animal testing, or only the products known to be tested on animals?

A recent report by London-based registered charity FairPensions suggests that some investment funds claiming to be ethical are not necessarily meeting the objectives ethical investors may expect. For example, ethical funds may reject investing in obviously unethical sectors such as gambling, alcohol and pornography, but may invest in companies that make use of child labor, pollute the environment, or use non-renewable resources. The research further reveals that many ethical fund managers are not transparent about what they are investing in, and only one in five conducts customer surveys to establish what ethical investors expect from a fund. Head of policy and research at FairPensions, Christine Berry, notes that if ethical investors simply want to have a clear conscience knowing they are excluding unethical companies from their portfolios, then the current version of ethical investing would work for them. But if they would like to make a difference in the behavior of corporations through the power of their investment, they need to ask their provider more questions. (FairPensions is an advocacy group that focuses on encouraging pension funds to make use of ethical investment strategies.)