When it comes to making money through investing, it’s hard to take a step back and ask if what we’re doing is harmful to the things we hold dear. It’s much easier, with the things we see every day, to make choices that lead to more sustainable living. You are more likely to take steps to reduce energy and water consumption, and to buy fewer things (and avoid packaging waste) because you can see the practical effects each day.
With investing, though, the concept of sustainability and living up to your ideals is much more nebulous. This is especially true if you are investing in funds. You buy shares in a fund with a description that meets your long-term investing goals, but you don’t really think about what companies that fund is composed of.
As you make your efforts to live more sustainably, does that include investing according to your conscience?
What Companies are You Supporting?
One of the arguments for socially responsible investing is that your money is tacit approval of what’s going on with a company. So, if you invest in a company that hires child labor in unsafe working conditions in third-world countries, you are, in a way, condoning that work. At the very least, you are profiting off the fact that the company’s profit margins are wider because of their labor practices.
Of course, if you don’t care about child labor and working conditions in other countries, it might not matter to you how a company makes its money. However, you might be interested in the environment, wildlife protection, abortion, or women’s reproductive health. Perhaps you are worried about equal rights, and don’t wish to support a company that denies basic rights to others based on gender, sexual orientation, religious affiliation, race, or some other characteristic.
Some investors aren’t as concerned about individual practices as they are about overall values. Does the company represent something that you agree with? Does the company’s philosophy and mission statement reflect your own personal values and conscience? And if not, are you comfortable with the idea that the company might engage in activities that go directly against your own conscience?
Are You Really Supporting Companies When You Buy Investments?
Some investors point out that, when you buy stock through an exchange, rather than via direct investment, you aren’t really doing much to benefit a company as it is. Instead, you are making an exchange with another party. You aren’t buying from the company; you are buying from another investor.
In some cases, funds and ETFs don’t actually directly invest in companies. Instead, they follow the companies and the performance of the fund, or the index fund, is based on how things are going with the included investments. But it’s not a direct investment.
Even when this is the case, some investors aren’t comfortable with the idea of profiting off companies that don’t fit their values.
What Do You Think?
The idea behind socially responsible investing is that you look for companies, funds, and other investments that reflect your values. This means that, before investing, you think about what matters to you, and how you feel about certain issues. Then you decide what you want to support.
Investing with your conscience is about trying to feel good about the way you make money through investing by focusing on assets that align with your values. So, if you believe that renewable energy is important for the future, you make it a point to, rather than invest in companies (and funds that include companies) that profit off fossil fuels, buy shares of companies and funds that support renewable energy projects. There are also those that won’t buy shares of companies that support embryonic stem cell research because it goes against their ideas of what’s moral and important.
One of the difficult things about investing according to your conscience is the fact that, in some cases, these companies might not be making a lot of money right now. It could take years for your investment to pay off — or it might not pan out at all. Meanwhile, the tried and true companies that engage in practices you don’t agree with continue to see gains. It can be frustrating for many investors.
What do you think? Do you invest your conscience? Does it work out for you?