Ethical investing, not an oxymoron

By Cameron Baughen

Recently, I came into some money with the stipulation that it not go toward any immediate needs, like eating, but instead should be used for my retirement. Being in philosophy, where actually retiring from something sounds a bit hopeful, I thought what the hell. Like most investors, I went looking to invest in a nice mutual fund and because I don’t want to support evil (i.e. Disney), I started looking at ethical and environmental funds.

Each mutual fund was quite different as each followed different criteria. Many of the larger managers called companies ethical if they didn’t invest heavily in tobacco or the military. Some of the smaller firms had far more stringent and wide ranging measures, such as labour and environmental standards. In these smaller firms, besides some interesting picks (like the Sudanese involved Occidental petroleum), most of the companies listed followed fairly good business practices and were open to investor scrutiny.

Not surprisingly, most of the funds had a history of good performance. As one web site put it, the success of ethical funds comes from the fact that companies with strong environmental and social platforms are also those that manage their company progressively, with an eye on their workers and on society.

Economist Amory Lovins, who was at the university recently, spoke about the benefits companies receive from thinking about ethical issues. One example he raised was about a struggling carpet company that moved from the carpet making business to the renting of "carpet satisfaction."

The company makes and rents carpet to businesses, and every month they replace pieces of worn out carpet. This benefits the company renting the carpet because their carpet looks great and they don’t have to entirely replace their slightly worn carpet every five years or so. Along with this, the company devised a new type of carpet that can be recycled into new carpet. Instead of their product ending up in landfills, it is reused, cutting down on the cost of inputs. These savings resulted in a cheaper (and safer) product that increased profits, employed more people and presumably raised the stock price.

As is shown by this and other examples, intelligent management practices based on an ethical philosophy beyond just making money actually do make money.

In a world of ever increasing ethical legislation, along with social and consumer activism, it pays to head off problems at the outset. Any company that speaks truthfully and meaningfully with the public and social groups has a far easier time doing business and brings greater benefits to society. This means socially and environmentally conscious companies will ever increasingly outperform their less ethical competitors. I’m betting on it.


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