By guest contributor Rebecca O’Connor
It’s ethical investment week, and although I consider myself a reasonably ethical human being (don’t deliberately harm other people or animals/try to do nice things/eat very little meat/ turn the heating off), something about this nomenclature rankles and makes me back away.
Is it actually helpful to think about investment as ethical or unethical? It seems unfortunately necessary, but also paradoxically self-defeating.
The arguments for and against openly declaring an investment ethical is not unlike the argument for openly declaring yourself a feminist. Some people pat you on the back, others become wary. It is as likely to put off one segment of your target audience – those sympathetic to the cause but also wanting to make some money, as it is to attract them. Worthiness is not an appealing characteristic.
The problem is partly the emotional response an audience has to anything imploring them to behave in a better way than they do currently, because it implies that at the moment, they are behaving badly. The response to pleas to invest ethically is a bit like the response to pleas to recycle more or make your home more energy efficient to save the planet: feelings of guilt.
This leads to the problem: how on earth to get people investing ethically if talking about it as ethical makes people feel guilty? So guilty that they can’t live up to it and decide to just avoid the whole thing? Or worse, accept the fatal flaws of the human condition, say: “if you can’t beat ‘em, join ‘em”, and immediately go and invest in fossil fuels, all in the name of realism.
Investing ethically is one of the most important things we can do as individuals.
Thankfully, it is becoming more important to regular investors who might eat organically and shop locally but have realised their portfolio is a bit behind the rest of their increasingly impact-conscious lifestyles. This increase in demand from people who have some money is one reason there has been an improvement in the performance of “ethical” investments.
People should care where their money goes. Of course they should, like we should all care about the humanitarian crisis in Syria or victims of domestic abuse. And we do, but we don’t always feel there are that many ways we can act on this caring. The great thing about investing is that apart from giving to charity or volunteering, it is probably the easiest way to show support for what you care about. Money makes the world go round, after all. And which way it spins depends on what the money is flowing into.
One day, I like to think, there will ONLY be ethical investments, as human beings evolve into the caring creatures we want to be. But we aren’t there yet and until we are, as the Church of England proved with the Wonga debacle, it’s a difficult world to negotiate. If the church can’t even work it out, then what hope the rest of us?
For example, we call renewable energy an “ethical” investment because of its innumerable benefits to planet and people. But is it that straightforward? If you are a worker in a solar panel factory in China, do you get decent lunchbreaks, pay and health and safety protection? If not, is an investment in a solar project ethical and how many carbon emissions would you need to cut before you could justify the Chinese worker’s discomfort?
So, perhaps instead of waving the ethical flag, which can make people both uncomfortable and cynical, it might be more helpful to talk purely about the assets and the potential profit from them, then let investors make up their own mind, based on their own knowledge and consciences?
For this to happen, the investment world needs to become a lot more transparent than it is now. How can people make investment decisions that take into account ethics without proper information, beyond the name of the fund, the name of the manager, sector, benchmark performance and charges, which are the usual tools of investment comparison? Bad things happen in the dark, and that is where most investors are when it comes to what their money is funding.
Labelling something “dark green”, “light green”, is not enough – it is less transparency – another layer of nomenclature to learn – not more. We need to make it clear to people exactly what funds invest in: the names of the companies, a breakdown of those companies’ CSR records, and the proportion of the fund that is invested in each sector or company – so that investors can make up their own minds about whether the investment is ethical or not. I might even want to know about the fund manager. What does he or she personally invest in? And if it is all oil and gas, what are they doing in charge of my environmental fund? There needs to be a column added to every investment comparison chart in the land that scores products on environmental and social impact, along with an explanation of how that was calculated.
Even with such tools, the ethics of a particular investment will remain subjective. But at least, with this information, you will be able to choose for yourself what investment opportunities do or don’t meet your personal criteria. You might even discover criteria you didn’t know you had. You might become a better person and in an unBritish way, start talking about money at the dinner table, because like the provenance of your Beef Wellington and organic wine, you’ll feel proud about what your money is doing.
Visit the Trillion Fund directory here for investments in renewable energy.
Also by Rebecca:
Clean energy to keep the lights on and reduce bills
Community ownership scheme to lift households out of fuel poverty