I was doing some work and my girlfriend called me over to participate in a conversation some friends who live across the hall were having on if investing is ethical or not?

I think oui mais non. This Forbes article explains ‘ethical investing’ pretty well. In it it defines ‘ethical investing as’

Ethical investing generally means investing in companies whose products and business practices match your personal beliefs.

Fundamentally we have to remember that when a company IPO a main factor in doing so is raising capital so that they can further expand their business. So when someone invest in stock x, the investor is feeding the coffers of x company for a share in it (part ownership). There are many different types of shares (with different additional benefits) and most of the time the investor is not directly buying those shares from the company, but the principle stands. In spirit at least, the investor is agreeing with what x company is doing and providing it money to grow in value.

The article goes onto define the 4 types of ethical investing, which I will just go ahead and quote:

• Socially Responsible Investing: SRI investing avoids controversial industries like gambling, firearms, tobacco, alcohol and oil.
• Environmental, Social and Governance: With ESG investing, investors consider the environmental and social impacts of the company and its governance. Investors tend to focus on sustainability and transparent business practices.
• Impact Investing: Impact investing combines social or environmental benefits with financial returns. It’s best for investors who select companies based on their performance in those areas and deliver growth at the same time. For example, impact investors may seek out companies that produce solar energy systems.
• Faith-Based Investing: Faith-based investors only invest in companies that follow their religious values, and they exclude companies that don’t match that belief system.

So let’s go with the most basic. It is not controversial to say that investing in BP, Exon (Oil and Gas)… are nicht gut (btw these are bundled in any S&P 500 ETFs). Their primary motives are to provide shareholder value (SHV) and have repeatedly shown no concern for human rights or the environment. We can extend that metric to companies that directly profit off the military industrial complex, demerit goods (companies that sell goods that are harmful to the consumer like alcohol and tobacco) monopolisation of real estate and finical services. This I think is still not controversial, these are companies that directly harm the welfare of the human race. I would extend that to fast fashion, high fashion (both very bad for the environment), data brokers, big tech, exploitative medical patent holders, gig-work companies, fast food/soda companies and supermarket chains. This cuts out pretty much all the S&P 500, NASDAQ, Dow Joins… pretty much all blue chip stocks, not all but almost all of them. I personally would extend this to most government contractors, as it makes the government over reliant on temporary labour and not have the capabilities to innovate by themselves. I would also extend these to closed source software developers (oracle, IBM) although they are the companies that end up paying my bills as an open source developer.

Pretty much, if a company is behaving in a way that harms people or destroys the free market for the sake of profits (alienation), I don’t really think investors should be supporting (investing) in it. This is because in the search of profits, the investor is promoting these companies who are harming society. As we cry about how x company is evil and harming society, we simultaneously throw our savings and spare change into them in the hopes of returning a profit. So how is the investor any better than the company that is perpetrating the evil, both are forgoing their humanity for the sake of scraping profits. Praxis my friends.

One can argue, that is just how capitalism works, the human is second to the dollar. I think that is very sad. Yes, the literature and history of capitalism does show that this is true, but it is each individual’s choice to continue humanity’s gradual degradation. The helplessness something that someone has to except, it is not prescribed by the system.

One can turn to ESG and SRI investing as a solution. ESG and SRI are novel buzz words that are thrown around by board directors and marketing departments to show that the company is working for ‘good’ (and to please Larry Fink and hipster VCs). ESG and SRI have caused many companies to care more about humanity and less about their profits, but for the most part it has only shifted their goals into giving off the impression of caring rather than making the structural change to stop harming humanity. It has become an effective marketing tool to convince the consumer that they are also “good” for consuming/investing in the company. ESG and SRI are bullshit, look at my essay on bullshit for more and come to your own conclusions.

The article adds some more things like ethical ETFs portfolio performance, goes on to essentially explains why not to ethically invest (boo 👎). I would argue that ethical investing is possible, it is hard but possible. Good can be done under capitalism, we don’t have to go down the same route again and again. It will take consumers and especially investors radically changing their behaviour, or massive government legislation. If I am being honest, I trust more trust in individuals (the masses) making a change than the corrupt politicians (are the special interest groups whispering in their ears). If consumer/investors are able to truly evaluate companies not for their profits but for their impact and service to humanity, these companies will then, by the law of demand, become profitable. It is a win-win! However, I doubt that will ever happen due to its difficulty, and human selfishness. Sooner or later, capitalism will either blow up in a popular revolt or reset by literally blowing up (like in WW1 and WW2). I still have hope though!

Have a pleasant and introspective day (or evening or night)!