Investment ethics

[Mr Pink]

I presume people on this board have been asked from time to time whether they invest ethically.  I'd be interested to hear anyone's thoughts on where they would draw their lines on investment ethics.  If anyone has an all encompassing acid test - that'd be interesting - but in the absence of that - I'd be curious to hear from anyone:

 

What industry/business is just barely acceptable to  invest in?  Which one is barely unacceptable?  What would be the criteria for that decision?

Same question for geography: which country would be barely OK vs. just over the line?

 

In both cases - this would be for a passive shareholding in a publicly traded company.  You feel the investment is potentially stellar but not life changing.  Your investment would not meaningfully change the businesses cost of capital.

 

Appreciate anyone's thoughts on the topic

[Jurgis]

Investment ethics?

 

"Greed is good"

 

8)

 

If it's your own money, you pick whatever ethical stances you want.

If it's OPM, then still probably pick whatever ethical stances you want and decide whether to tell your investors or not. SRI/ESG ( https://en.wikipedia.org/wiki/Socially_responsible_investing ) might make sense for large® funds, but not sure if it's a good strategy for small funds - unless you really know your investors and they share your principles.

 

Most ethical stances (mine too) are inconsistent and politicized, so not really worth posting here. (PM if really interested 8)).

 

"Money corrupts"

 

I won't point fingers, but read almost any controversial thread on CoBF and notice how "ethics" goes out of the window the moment someone has money on the line. Almost any company behavior can and will be justified once someone invests into it "cheaply enough". Especially if/when investor starts making gains. 8) I am guilty of this myself too.

 

Have fun.  8)

[Viking]

Mr Pink, this may not be the answer you are looking for. My filter on investing ethically is to focus on management. Are they trustworthy? Are they straightforward in their communication with shareholders? Do they deliver on promises? If not, why? If they are not trustworthy, I will sell my shares (if I hold any) and move on. As in have said before, it normally takes me three conference calls to get a handle on management.

[DTEJD1997]

Generally speaking, I will invest in ALMOST anything that is legal....

 

HOWEVER, there are a few things that I struggle with.

 

One clear "NO GO" for me is most "for profit" education.  Some of these companies are legit and do good for their students and society as a whole.  HOWEVER, a good chunk of them, perhaps a majority, are simply lying scamsters.  They are a curse on society, a burden on their students & graduates, and serve to enrich nobody other than senior level management.  These are the places that are running diploma mills, places where credits don't transfer, students don't learn, graduates don't get jobs.  Management is producing fraudulent sales brochures and fraudulent statistics for accreditation & regulators.  Simply a scam to transfer wealth from the government to the senior level management.  Students & graduates get caught in the middle.

 

For example, tobacco & cigarette companies.  The product they sell is detrimental to people's health and society.  HOWEVER, it is a legal product and it's risks are well known and understood.

 

Multi-level Marketing MLM is another difficult area.  These things are largely frauds.

 

I would also posit that if you are invested in a company that you find out is doing something fraudulent & illegal, you've got an obligation to get out and NOT profit from their misdeeds.

 

With those caveats, as long as everything is disclosed and above board, I have no problem investing in companies that charge very high interest (buy here, pay here auto lots), credit cards, defense companies, gun companies, alcohol companies, gambling & casinos.

 

Different things for different folks. 

[SharperDingaan]

This means very different things to diffferent investors, & ultimately is a decision as to how an investment will be made.

While well meaning, it often suffers from poor understanding.

 

According to many environmentalists carbon credits are the 'devils creation' and nothing less than a tax grab; the money collected just goes towards the creation of more pollution, minus a healthy 'cut' to the government. Whereas it's actually a very smart thing to do; that 1 very dirty plant gets shut down in favour of 2-3 'cleaner' plants - same total pollution, but now 2-3x the employment. Putting a price on pollution, justifies investment in pollution scrubbers; if the PV of pollution costs saved > cost of the new equipment. Ultimately if we value something (clean air, water, etc.) enough to put a price on it, it will be done - as ACTIONS change behaviour, NOT words.

 

Similar arguments apply to addiction and heathcare. Someone who frequently smokes will become addicted, and it will cost them an early death. Early stage treatment may turn things around, but it has limits; at some point it will cost a lot less to just give the smoker enough cancer sticks to hasten their end, & treat only for pain. Different paths, both equally acceptable.

 

There's lot of investment literature on the topic, but ultimately its a personal decision.

 

SD

 

 

 

I presume people on this board have been asked from time to time whether they invest ethically.  I'd be interested to hear anyone's thoughts on where they would draw their lines on investment ethics.  If anyone has an all encompassing acid test - that'd be interesting - but in the absence of that - I'd be curious to hear from anyone:

 

What industry/business is just barely acceptable to  invest in?  Which one is barely unacceptable?  What would be the criteria for that decision?

Same question for geography: which country would be barely OK vs. just over the line?

 

In both cases - this would be for a passive shareholding in a publicly traded company.  You feel the investment is potentially stellar but not life changing.  Your investment would not meaningfully change the businesses cost of capital.

 

Appreciate anyone's thoughts on the topic

[Foreign Tuffett]

Looks like Dan Loeb has brought back his "Mr Pink" message board username, and is now trolling this board by asking about "investment ethics."

[DooDiligence]

Looks like Dan Loeb has brought back his "Mr Pink" message board username, and is now trolling this board by asking about "investment ethics."

 

Either that or he's Steve Buscemi.

[Mr Pink]

Generally speaking, I will invest in ALMOST anything that is legal....

 

HOWEVER, there are a few things that I struggle with.

 

One clear "NO GO" for me is most "for profit" education.  Some of these companies are legit and do good for their students and society as a whole.  HOWEVER, a good chunk of them, perhaps a majority, are simply lying scamsters.  They are a curse on society, a burden on their students & graduates, and serve to enrich nobody other than senior level management.  These are the places that are running diploma mills, places where credits don't transfer, students don't learn, graduates don't get jobs.  Management is producing fraudulent sales brochures and fraudulent statistics for accreditation & regulators.  Simply a scam to transfer wealth from the government to the senior level management.  Students & graduates get caught in the middle.

 

For example, tobacco & cigarette companies.  The product they sell is detrimental to people's health and society.  HOWEVER, it is a legal product and it's risks are well known and understood.

 

Multi-level Marketing MLM is another difficult area.  These things are largely frauds.

 

I would also posit that if you are invested in a company that you find out is doing something fraudulent & illegal, you've got an obligation to get out and NOT profit from their misdeeds.

 

With those caveats, as long as everything is disclosed and above board, I have no problem investing in companies that charge very high interest (buy here, pay here auto lots), credit cards, defense companies, gun companies, alcohol companies, gambling & casinos.

 

Different things for different folks.

 

 

I think there is a lot to be said for assuming that adults can make their own decisions vs. many traditional definitions on this topic - although there are a lot of cases/examples that give me pause with this boundary as well.  But I tend to agree that companies which harm their customers without real knowledgeable consent are especially problematic. 

 

I'd be curious if anyone has thoughts on the geographic part of the question.  This may not come up for a lot of people but are there geographies that you would not feel comfortable investing in for a definable reason (apart from legal reasons)?