Ethical investing?

[prairiegirl]

Canadian here. A lot of the funds have things I'm not terribly comfortable investing in. About 10 years ago, a colleague of mine said to me, "If someone ain't getting screwed somewhere, you're not going to make any money. That's the stock market."  Was he right?

I'm wondering if there is any hope for someone like me who doesn't want to invest in oil & gas or the big banks, for example. I try hard every day to minimize my footprint on the Earth. I follow a lot of the MMM lifestyle and have for a long time. It's the investing part I cannot get my head around for environmental & other reasons. Even the Credit Union's so-called Ethical Funds don't seem that ethical to me.

Thanks in advance.

PS: I'm not saying anyone is wrong or right for investing in the stock market, I'm saying that *I'm* conflicted and have been for quite some time, yet I want financial freedom so I can live my life as I choose, which I mostly do now but not with a guaranteed income, which would be super awesome. :)

[Seppia]

If you can/it works with where you are, invest in land and farm it or have animals on it (ideally both).
If you balance things in a natural way it will provide revenue at zero cost (after the startup costs obviously), as it could be a self sustainable ecosystem.

[milesdividendmd]

There are many ways to invest ethically.

Purchase an "ethical" mutual fund/ETF that excludes company types that you are not comfortable with.

Slternatively stock picking companies that you feel to be both good investments and consistent with your concerns.

None will likely be as cheap or as effective as simple cap weighted fund of course.

[JJNL]

Or invest in real estate. Would that fit in your ethical portfolio?

[Kriegsspiel]

I'm wondering if there is any hope for someone like me who doesn't want to invest in oil & gas or the big banks, for example. I try hard every day to minimize my footprint on the Earth. I follow a lot of the MMM lifestyle and have for a long time. It's the investing part I cannot get my head around for environmental & other reasons. Even the Credit Union's so-called Ethical Funds don't seem that ethical to me.

Maybe if you don't drive a car or use petroleum-based transportation, or use plastics, then you can disdain oil & gas investments (I mean disdain them for yourself, and forego profits for everyone else who doesn't by not investing in those companies). And maybe you don't want to participate in the loans big banks make. All you have to do is a bit of research to determine which companies do not do these things. Then you can ethically invest.

I take your meaning to be "I don't use oil or gas or banking products," as one level. Like, "I don't buy gasoline at Shell." Level two would be that you disapprove of other people using those products. "I don't want to own Shell, because other people use it to fuel their gasoline cars." And "I don't want to own shares of JP Morgan Chase, since they securitize mortgage backed securities." Plus "I don't want to own Deutchebank, since they purchase MBSs."

Maybe you could compile a list of companies that do not dispense oil/gas products, nor use plastic or asphalt, nor securitize MBS or CDOs, or derivatives.. I'm sure there are some kinda of financial technologies that I'm not including, so you'll need to include those too, since the bigger banks use that kind of financial technology.

If you want to be lazy, you may be able to find a list that someone else has put together that meets your criteria. Just google "ethical investing."

[lemanfan]

The next step after "Exclusion investing" is to actively invest in funds or investment companies who try to steer their holdings into making better choices when it compes to ethical or sustainable factors such as human/labor rigts, polution, corruption etc etc. 

Personally I just stick to the index funds when investing.

[WerKater]

Canadian here. A lot of the funds have things I'm not terribly comfortable investing in. About 10 years ago, a colleague of mine said to me, "If someone ain't getting screwed somewhere, you're not going to make any money. That's the stock market."  Was he right?

No, he was dead wrong. That is just a statement of a typical person who has no clue about how an economy works. The statement is based on a sort of zero-sum-fallacy which believes that a person can only increase his wealth by taking something away from someone else. It completely neglects that wealth can be created (and is, all the time).

Of course, everything else you said is in fact much more nuanced and sensible than this quote, so I understand that you have thought this through much better than he has. There are many options for "ethical investing", as others have already pointed out. But obviously people's interpretation of "ethical" varies wildly.
To me, the first thing you need is an exact definition of what it means for you. E.g., you mentioned oil and gas, but would you be OK with investing in an automaker? Companies that do not really deal in oil or gas but use a lot of it (airlines or whatever)? Depending on how strict you want to be, this might get awfully complicated.

[Phil_Moore]

I 100% sympathise with your position, but to be honest I'm not sure ethical investing is really that workable, and I'm not sure of what impact it is going to have even if it were. If you cut out all the ethically iffy companies (tobacco, banks, oil & gas, chemicals, mining, almost the entire financial services industry, auto, insurance, aerospace/defence, heavy industrials, pharma, big agri etc. etc.) you're really skewing your portfolio away from the market.  And even if you are happy to do that, and take on the additional risks and costs that will likely entail, what difference will it make? Someone else owns those shares regardless of what you do, and they might not use the proceeds in as ethical a manner as you would.

Maybe I'm deluding myself, but it seems ethically neutral to just own the whole market, then you can expend your time, energy and wealth on whatever causes are important to you while not using the products or services of companies you disagree with.

[worms]

I'm wondering if there is any hope for someone like me...

There is always hope!   But remember that the maths on retirement funds will need to be recalculated based on the likely return from the investments that you do find acceptable.

If you can/it works with where you are, invest in land and farm it or have animals on it (ideally both).
If you balance things in a natural way it will provide revenue at zero cost (after the startup costs obviously), as it could be a self sustainable ecosystem.

Low input perhaps, but it is very difficult to envisage a zero-input system in a western economy that provides sufficient return.  And unless your kids are going to keep it going and look after you in your old age, you will still need to fund your later years when you are no longer capable to work the farm.

[Seppia]

Of course but I think it's a lot more doable than people might think.
Just 50 years ago there were a lot a self sustaining farms, at least where I'm from

[worms]

Of course but I think it's a lot more doable than people might think.
Just 50 years ago there were a lot a self sustaining farms, at least where I'm from

Go on, give us more of a clue to where this was!  :)  hmmm....a western economy, in the mid 60s?  With no tractors, bought-in feed, bagged fertiliser or "big pharma" veterinary inputs?  And not part of a multi-generation family-farm system?  It would need to either be on a subsistence scale or an extensive "dog & stick" system.  I guess some New Zealand hill sheep stations would be close and there are a number of part-time small-holder systems but they nearly all depend on external cash income from additional jobs.  If you accept minimal inputs in terms of diesel, then the options widen considerably to the small mixed-farms which still formed the backbone of western farming in the 60s. 

Low input mixed farming is definitely do-able and I can see it working as a supplement to retirement income but it is hard work and not for the aged and infirm!

[Seppia]

Low input mixed farming is definitely do-able and I can see it working as a supplement to retirement income but it is hard work and not for the aged and infirm!

I wasn't very clear sorry, I mean low input, not COMPLETELY self sustainable.
Some electricity and help from family is needed, also some gas and soma basic help against infestations etc, and possibly something minor that I'm forgetting.
I'm talking about Italy by the way.

[ShoulderThingThatGoesUp]

Subsistence farming isn't a good investment.

I find what the U.S. government does with my taxes to be a lot more ethically concerning than what Exxon would do with my investment, personally. Exxon doesn't put anybody in solitary confinement for selling weed. So I don't worry too much about what's in the index funds.

[worms]

I'm talking about Italy by the way.

Damn! I was betting on Greece or Spain, but in both cases I'd have questioned whether the regimes I the 60's really counted as a western economy - got to give you Italy, though!

There is a bigger question about whether it is possible to re-build a modern equivalent of a rural "peasant" economy with all the comforts and safety nets that we currently desire but built on the productivity of small-scale low-external-input farming systems.  I'm inclined to think the answer is 'no', although there are examples from Africa of increased production going hand-in-hand with improved environment and economy, despite increases in population.

[Thegoblinchief]

Motif is a platform you can look at.

Personally I have given up on ethical investing. Once you start drawing lines, it's impossible to decide where to put the final divider between not-ethical-enough and "oh fine, I guess".

As others have pointed out in previous threads, it's one thing to patronize unethical businesses, it's yet another to tap into their revenue stream via secondhand ownership. YMMV.

[Mark31]

You’re right when you say a lot of “ethical” funds aren’t very ethical, they just drop out tobacco and armaments, or they maybe have a least worst by industry sector approach, but they’ll charge you higher management fees anyway.

You’re clearly taking the environment ethical angle, and by industry, but how companies treat their workforce or manage their own environmental impact are also ethical issues.

Some ethical funds also take an advocacy approach – they’ll invest in imperfect companies with the hope of changing them for the better.

If you’re going to get too pedantic about ethical considerations, you’ll never invest your money at all. You just need to be happy that the bundle of companies you’re investing in is better than the alternative bundle. There is no need to sacrifice returns, but you do need a managed fund, of course, no index investing available here.

I have no idea what is available in Canada, but I’m more than happy with my Australian Ethical managed funds. They apply both a positive and negative screen to companies. They’ve got a list here https://www.australianethical.com.au/companies-we-invest-in/ I make market level returns, and no-one gets screwed.

Canada’s got a bigger population than Australia, so surely you have options.

Basically you end up investing in a lot of renewable energy, energy efficiency, recycling operations, public transport, second tier banks,  medical technologies, IT services.

I also have money not invested ethically (but not actually un-ethically!), because that’s in my superannuation fund, and I’m tied to a provider who only offers the B grade “ethical” options I mentioned above, which just didn’t seem worth it.

[expatartist]

As another poster mentioned above, Real Estate is ethical investing, depending on how you go about it.

That's one of its big appeals for me, and why it's a significant part of my investments.