Investment ethics

The dictionary lists several different definitions of the word “morality”. The main definition is a system of moral principles, and the secondary definition is that ethics is the behavioral rules used by a specific group or culture. The final definition of ethics is a branch of philosophy that involves values ​​related to human behavior, the right and wrong of certain behaviors and their respective motives and consequences.

The correct application of ethics in investment is a highly subjective topic, which may cause difficulties for investors and regulators. It does raise the question of why business ethics is important.

Moral dilemma

Although the definition of ethical investment can be said to be a simple purchase of investment from issuers that behave ethically, investors seeking to achieve this goal must first establish a set of standards that can be used to determine which behaviors and practices are ethical to them of. For example, the Bible and other religious books provide people with the rules and principles of life, and those who believe in what these books say use them as a guide for evaluating things in the world around them. However, religious texts and other moral teachings do not always provide clear guidance for actual investment decisions.

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Although it is usually relatively simple to create or find the ethical standards used as the basis for evaluating investments, it can be more difficult to apply these standards effectively to actual investment choices. For example, the Bible condemns drunkenness in several places, but does this mean that buying securities issued by alcohol manufacturers is unconditionally wrong? Since not all drinkers get drunk, investors must decide for themselves whether the investment truly supports unethical behavior.Almost all issuers of securities or investments are most likely to do so something At least a considerable number of investors disapprove (how many investors who buy government bonds approve of everything the government does?). Of course, this raises the question of which practices and policies can be tolerated by investors and which cannot.

Ethical issues

Although the values ​​and beliefs that guide ethical investors vary from person to person, ethics plays an important role in several specific areas. Some of the more noteworthy issues that investors consider from an ethical perspective include:

Win someone else’s expense

Although there will inevitably be winners and losers in a free market economy, the question of how companies win is a concern for some people. A company that has a monopoly in the market or industry can operate very efficiently in many ways. Nevertheless, they have effectively prevented any form of healthy business competition, which some investors consider unethical.

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Environmental responsibility

Heavy industries such as energy and manufacturing have long been regarded as destroyers of nature and wildlife, causing pollution and destruction to forests, oceans, lakes and rivers. Ethical investors favor companies that can replace resources obtained from the planet and comply with government emission standards.

Abortion and stem cell research

Companies that profit from certain medical procedures or types of research are often regarded as immoral or even criminal by people in the Judeo-Christian community.

“Criminal” Industry

Although the concept of industry guilt is obviously somewhat subjective, there are still some investors who believe that liquor manufacturers, tobacco companies, casinos and the porn industry are taboos. For example, the tobacco industry has long been accused of treating teenagers as customers and making its products as addictive as possible to promote sales. Although criminal industries have worked hard to raise public awareness of the dangers of misusing their products and services, some investors may choose to avoid companies operating in these industries.

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Socially conscious investment

Many investors seeking to avoid investments that they consider unethical have turned their attention to tools such as socially conscious mutual funds, which screen companies based on specific ethical standards. Many of these funds are provided by religious denominations, such as the Lutheran Brotherhood, which usually avoid investing in any of the above-mentioned “criminal” industries and can give investors a clear conscience in the field.

Other matters needing attention

Of course, the ability of investors to make wise ethical choices will be affected by the quality of the information they receive. For example, the accuracy of emissions and other environmental reports issued by large conglomerates such as Exxon Mobil may be doubtful.The data published by other companies convicted of major accounting fraud crimes, such as Enron and WorldCom, are false.

Bottom line

Morality is morally subjective in nature, and there is no absolute standard for what is or is not an ethical investment. Investors must ultimately decide for themselves what they think is ethical, and then try to apply it to their investment choices. For more information on ethical investing, please consult your financial advisor.


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