At its simplest, ethical investing involves simply purchasing investments from issuers who act ethically. However, investors who seek to achieve this must first establish what they regard as unethical. Of course what some people see as unethical others don’t. For example, some people think tobacco companies and makers of alcoholic beverages are unethical, helping to create lung cancer and alcoholism. Smokers and alcohol drinks may see cigarettes and wine, for example,  as just other products to be enjoyed. Here are some issues that ethical investors may be concerned with.

  • Monopolies. Companies that have monopolies in a market or industry can function very efficiently in many respects, but they also effectively prevent any form of healthy business competition, and some investors consider this to be unethical.
  • Environmental damage. Energy, mining and manufacturing have long been seen as damaging nature and wildlife and polluters or air and water and destroyers of forests.
  • Abortion and Stem-Cell Research – Companies that profit from certain medical procedures or types of research are often considered to be unethical.
  • Makers of alcoholic beverages, tobacco companies and the pornographic films are often accused of many of societies ills including sex crimes, sexualisation of young people, drunken behaviours and diseases

There are investments funds and socially conscious mutual funds that will try to place funds in ethically operating companies and industries and avoid those that are seen to be unethical. Making ethical decisions will depend on the quality of information that people receive. Of course, being ethical has a price to pay. Perhaps ethical investing will result in lower financial returns. Investors must ultimately decide whether loss of income is worth the social and ethical gains. Marcus Henn has some valuable insights into ethical investing. You can read them here


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