Overly socially responsible investing?

[jrh]

I have a quirk in my personality that some of you might be able to relate to.  I care a lot about what I'm investing in.  Not just what kind of returns it will get, but also what impact the business has on the world.

I'm not content to stick my money in any old index fund and call it good.  Most index funds have holdings in businesses I'd rather not support, like alcohol, military, poor labor practices, negative environmental impact etc.

The problem is that when I look at holdings for many of the "socially responsible" index funds, I still don't like what I see.  I don't want to invest in PepsiCo because their product is responsible for so much obesity and other health problems.  I don't want to invest in Apple because of their poor labor practices overseas.  I avoid a lot of healthcare companies because it oftentimes seems like they are taking advantage of a broken healthcare system in order to profit.  I don't care to support a lot of retail and big box stores because of all the useless crap they make people feel like they need.  And on and on.

Basically, I'm having a hard time finding places I'd be really happy to put my money, places that offer decent returns without compromising my principles.

What do you all do to balance these concerns?

So far I like real estate and landlording.  It seems to offer good returns and I know I treat my tenants fairly.  I currently have one rental triplex.

I'm also happy to invest in utilities (hold UTG right now), as those are sort of "socially neutral" companies that provide an important service and are regulated to a point where their profits are not absurd and they generally treat their customers and employees fairly.

I would follow the "invest in the products you use" philosophy, but a lot of my purchases come from places that are impossible to invest in.  My groceries are from the local co-op and farmers market, furniture is from Craigslist, household goods are from Goodwill, etc.  I try to support small, local business that obviously are not publicly traded companies.

What are some other ideas?  Or am I just being ridiculous in my efforts to only support businesses I really believe in?

As a side note, I've always thought it's ironic how MMM is so passionate about living such a balanced, sustainable life, but doesn't seem to care about what his investments go to support.  Has anyone else noticed this?

[MDM]

See http://forum.mrmoneymustache.com/investor-alley/non-profit-and-socially-responsible-investing/ and http://forum.mrmoneymustache.com/investor-alley/amazing-resource-for-socially-responsible-mutual-funds!/ for some thoughts on this topic.

[nobodyspecial]

I've always thought it's ironic how MMM is so passionate about living such a balanced, sustainable life, but doesn't seem to care about what his investments go to support.

Where do you draw the line?

Do you think Apple is responsible for poor working practices in China or responsible for helping move  a country of a billion people from starving peasants into an emerging technological manufacturing center?
And why only Apple - don't you also have to avoid any other company that employs workers in China/India/Philipines/Indonesiaetc?
What about car makers with factories in Mexico - are they oppressing workers compared to standards in America?
What about car makers with factories in America - are they oppressing workers compared to standards in Germany?

Then you have to avoid all oil companies, car markers, alcohol, tobacco, airlines, big agriculture, pharmaceuticals, banks, etc.



 

[Sibley]

Only when you buy an initial public offering does the company itself get money.

You don't like a company = don't buy their products. Not investing in the stock market is cutting off your nose to spite your hair.

[jrh]

Where do you draw the line?

That's why I posted.  Was curious to hear others' thoughts about how they've reasoned this out.  Surely you wouldn't consider investing in child porn or ISIS fighters, so there must be a line somewhere, but how did you decide on it?

Years ago when I began investing I pretty much didn't care what the company was, as long as it provided a reasonable return.  I  didn't give much thought to their overall business.  It was just numbers and graphs.  As I've become more aware of how the world works, I've seen there are always causes and effects in play with real world consequences.  Nobody lives in a bubble.

I don't want to go overboard and swear off all investing.  As you pointed out, carried to an extreme, every business has elements which could be considered detrimental to the world.

Still, there must be a balance.  I'm looking for the middle ground and wondering how and where others have found it.

[jrh]

Only when you buy an initial public offering does the company itself get money.

You don't like a company = don't buy their products. Not investing in the stock market is cutting off your nose to spite your hair.

I see what you're saying, but money doesn't come out of thin air.  If an investor makes money, it's coming from somewhere, be it dividends or an increased demand for the stock...either of which comes from company profits.  The question is if those profits came in objectionable ways or not.

[dandarc]

Honestly, if you feel that strongly about it, you'll have to do your own research and manage your own portfolio of individual stocks.

I think Sibley's suggestion is the reasonable middle ground here.

[immocardo]

Only when you buy an initial public offering does the company itself get money.

You don't like a company = don't buy their products. Not investing in the stock market is cutting off your nose to spite your hair.

I see what you're saying, but money doesn't come out of thin air.  If an investor makes money, it's coming from somewhere, be it dividends or an increased demand for the stock...either of which comes from company profits.  The question is if those profits came in objectionable ways or not.

A few hypothetical situations:

You are a vegetarian, your brother is a butcher.  Are you going to refuse any Christmas gifts he gives you?

You are against smoking, your brother works for a tobacco company.  Will you refuse any Christmas gifts he gives you?
-Does this change if he is the CEO?
-What if he's an Executive?
-What if he's a farmer that grows the crops?
-What if he works in a factory that packages the cigarettes?
-What if he is independently wealthy and he made his money by buying tobacco stocks?
-What if your wife/husband is wealthy because his/her parents are tobacco CEOs/Owners etc, will you hold it against her/him/them and refuse any monetary gifts for your wedding?

Where do you draw the line?  I understand the question, and it's an interesting moral dilemma but everyone's choice of where to draw the line will be their own.  Ultimately you have to just decide.

[RidinTheAsama]

Sibley is right.
Nothing you could do with your stock market investment dollars (aside from IPO's) has any affect on a company's ability or likeliness to operate unethically.  So with your investments, don't ever worry that you are promoting bad behaviour in the corporate world.

Having said that, you'd be accepting a share of the profits from 'unethical company X' and I can see how some might look at that as dirty money in your hands.

Personally, I only worry about what I have the power to change.  And in this field I only have the power to make change with my consumer dollars, not my investment dollars. jrh, it sounds like you are already doing an excellent job in that category.

[I'm a red panda]

Buy individual stocks instead of funds. Then you can pick exactly the companies you would like to invest in.

But if you want to maximize your profits, that might not be the way to go.  And I think you may have a hard time finding ANY company you are okay with.

Having said that, you'd be accepting a share of the profits from 'unethical company X' and I can see how some might look at that as dirty money in your hands.

This is why I prefer to minimize my investments in certain sectors.  However, I do hold some shares in companies I do not like because of my index funds, but I also have more money in social choice funds that avoid these.