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What is Ethical Investment?
by Danca Risamio
http://www.ruinvestment.com
Anyone doing a financial course 10 years ago may not have
encountered the concept of ethical investing. However, it
is an are that is growing and many suspect that it will
feature widely in investments of the 21st century.
Ethics is one of the big questions that has taxed
philosophers since the beginning of time. It is about the
choices we make and how we choose to live, and the issue is
far from settled. As far as ethical investment is
concerned, it is enough to say people have different
ethical codes.
The emergence of ethical investment as an investment option
has surfaced due to people becoming more aware about
investment in general. Most investors a decade or so ago
would employ a special financial advisor to invest money on
their behalf and to make their choices for them.
Once they had invested the money, most investors were only
concerned about the returns. The money entered a sort of
no mans land where it could not be touched and few worried
about the type of industries or companies they were
investing in.
This approach has caused problems for some. For instance
the Church of England found itself denouncing land mines
whilst the investment portfolio it held was pumping money
into the companies making the mines! It is easy to see how
this happened - the hierarchy of the Church, being
professional priests, gave the investment duties to
professional investors... Nowadays however, we see the
General Synod of the C of E looking over their investments
quite carefully.
It is the same for individual investors. One investor may
scold his friend for smoking too much whilst not having the
least idea that his financial investments are funding
cigarette companies.
Hence some people have decided that they want a more active
role in deciding who they are going to invest in. They are
checking their portfolios in detail and some are even
choosing to move for companies that specialize in ethical
investment.
Now, given that it is not clear cut what each person
considers ethical, each investor needs to take some
decisions. For instance, do you want to invest in companies
that make and sell weapons? Some would say they do not mind
investing in these things, since it is the job of society
to regulate the use and abuse of firearms. Others would
rather avoid these companies - but might be surprised how
much this limits their choices!
Another thorny issue is the company that uses very cheap
labor in other countries. How do you read this? Is the
company exploiting children or is it simply letting
capitalism work? In other words does any job in a poor
nation convey an opportunity or are these jobs withdrawing
chances by keeping kids from school? A North American
concern that shift production... is this taking jobs from
US citizens or helping the nation compete and helping
balance trade.?
There is no doubt that questions about ethics are
complicated, but many people now want to start grappling
with them. And although each small investor may not make
much difference, added together they could present a
problem for a company. If a lot of small investors choose
not to invest in a particular company it could give them a
clear message that their activities are not compatible with
the ethics of society - they may change their ways!
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