Topics: Investment, Mutual fund, Socially responsible investing Pages: 5 (1596 words) Published: February 1, 2013
Ethics of Investing
The concept of investing ethically is to purchase, with an anticipation of obtaining higher returns, the financial instruments issued by corporations which involve in ethical activities for their business. Simply put, Ethical investing is a way to make a difference, earn good returns and also feel good about what your money’s up to. More generally we can define an ethical investor to be the person who seeks to invest sums of money usually through mutual funds or unit trusts in firms or organizations which try to make a positive contribution to the fair trade, environment and quality of life for others. A long history

In spite of the recent increase in its popularity, ethical investing is not so new. In the 19th century, many religious movements in world such as the Quakers and the Methodists advised their members to avoid investing in firms which used to mistreat their workers or attempted to make profit by human frailty. Later when the Methodist Church itself started investing in the stock market in the early 20th century it made an attempt to explicitly exclude firms which are involved in alcohol and gambling from its portfolio. The trend grew and in 1971 the Pax World Fund, an American investment vehicle, was established—initially focused to avoid investments in companies involved with the war in Vietnam. Pax World now has several funds, all concentrating on the use of social coupled with financial criteria for investment, and aiming “to challenge corporations to establish and live up to specific standards of social and environmental responsibility.” Similarly, a prolonged campaign by people which also consisted of investors against investment in apartheid-governed South Africa during the last century influenced many companies—such as Ford and Coca-Cola—to reduce their business interests there, or pull out from there altogether. Quite recently, there have been campaigns by many organizations along with investors which advocate ethics in business have raised their voice against the activities of Shell in the North Sea oil fields and in Nigeria, and against Nike’s recruitment & employment practices in Asian countries. Current scenario

The internet, newspaper, TV and other modes of mass communication has helped in making available a great deal of information to investors. This has helped investors to become ethically aware to a great extent than ever before. Today, companies can no longer operate with the same level of privacy they used to have earlier, and investors can now easily find out about companies before agreeing to invest in them. The corporations in which to invest should be selected by setting some criteria based on the commonly accepted idea of ethics. Now, the notion of commonly accepted idea of ethics is a topic of discourse and as the famous American philosopher James Rachels says while discussing ethical egoism and puts forward, “All of our commonly accepted moral duties, from doing no harm unto others to speaking always the truth to keeping promises, are rooted in the one fundamental principle of self-interest.” Hence by that rationale of self interest, any form of investment which addresses the self interest of a large number of people can be considered ethical. For example, investing in companies which make cigarettes or alcoholic beverages as their prime product can be considered ethical as a huge number of people actually are involved in smoking & drinking and consider that as fine despite we all understand that they are a form of social evil. Many people would claim smoking to be perfectly ethical, but if one takes a holistic approach, it’s factually evident that smoking actually harm to not just the person who is smoking but to a large number of people indirectly. Hence it is debatable as to say which investments could be considered as ethical. Assuming that we have arrived at a consensus on claiming what is ethical and what is not, an unethical investment would...
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