Who owns the corporations that contribute to climate change, engage in appalling labour practices, and test products on animals? You probably do.
“Evil investments” may, on some level, be an inevitable part of putting your money in the market rather than in a shoe box under your bed. Maybe that’s fine with you. Or maybe you want to put your dollars toward investments that align a little more with your values.
Obviously there isn’t one definition of “evil” here — what’s acceptable to one person may be an abomination to another. But you can do your due diligence to find out what you own and whether they’re up to no good.
Any values-based investing analysis starts with determining what you care about. Racial equity? Environmental issues? Animal rights? Labour protections? Defining your values can help you decide what’s desirable, tolerable and a deal-breaker in terms of corporate behaviour. You can prioritise your values to determine what to exclude from your portfolio, as well as what types of investments you want to include.
You’ll also want to consider your preferred strategy. Do you care most about buying into companies that share your values and goals? Or do you want to focus more on engagement via shareholder action? Or some of both?
Start by pulling statements of what’s in your portfolio so you can search each product one by one. Explore what those corporations and funds are up to. One place to start is by looking for environmental, social, and governance (ESG) reports, which tell you about a company’s impact in these areas. Some organisations make these accessible online. There are also a handful of databases to search for information about ESG and how companies and funds stack up on specific values.
You can also find out if corporations are donating to causes you don’t agree with or politicians whose views conflict with yours. OpenSecrets allows you to search campaign contributions by organisation or look at funds received by specific candidates. There are also certain sectors that are more vulnerable to human rights abuses like forced labour, trafficking, and exploitation.
Note that a Google search on a company or a review of news articles is likely to raise only the most obvious red flags, says Nicholas Creel, an assistant professor of accounting and business law at Georgia College and State University. That means you probably won’t find all of the shady shit on the public record.
Divesting from evil corporations isn’t the only strategy for impact investing. You can also find out if the companies in your portfolio are taking steps (or not) to engage in better behaviour.
Elena Botella, principal at Omidyar Network in Washington, D.C., recommends researching shareholder resolutions on a company’s business practices, political contributions, and social impact. Look up key votes that involve shareholders and asset managers (if you own mutual or index funds) through organisations like Majority Action, Share Action and the Interfaith Centre on Corporate Responsibility.
Of course, any company or fund can pitch itself in a way that sounds great but is actually misleading. While some corporations publish public ESG reports, these and their mission statements are, ultimately, part of their marketing.
“The problem with this strategy will come down to the fact that you are left trusting that the company isn’t misrepresenting or hiding important information,” Creel says.
So, you may not always find all the dirty details on your own. If you already work with an advisor, ask all of your questions about the ethics of your portfolio. Many advisors are now familiar with ESG investing, so you can probably find someone on Google if you don’t already have one, or search membership organisations like US SIF.
While impact investing sounds noble, you also have to keep your returns in mind. In general, impact investing performs about the same as alternatives, but aim to maintain a balance of your money goals with your values.
“Don’t forget that your financial objectives are your top priority,” says Scott Sadler, founder of Atlanta-based Boardwalk Capital Management. “Build an investment plan and then implement the various pieces using sustainable vehicles.”
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