For many investors, playing the markets is all about turning a quick profit, and exactly what they use their money to support comes in a distant second. But for the growing number of “ethical” investors, putting their money into companies that don’t disturb their collective conscience is just as important as how much money they take out. But what is defined as “ethical”investing? According to a Bloomberg report published on Wednesday, that’s problematic.
According to Bloomberg, “ethical” investment funds would see investing in adult entertainment companies as less “ethical” than pumping money into non-renewable, polluting energy sources such as fossil fuels—or for that matter, guns.
Investopedia defines “ethical” investing as “the practice of using one's ethical principles as the primary filter for the selection of securities investing.” But most investment portfolio managers use a process called “negative screening” to make sure that their funds meet “ethical” criteria. That is, excluding entire sectors of companies, rather then evaluating the ethics of companies on an individual basis.
But Bloomberg found that “almost 40 percent of global credit funds would exclude adult entertainment when using negative screening.” Compare that to fossil fuel firms and gambling-related businesses, which are excluded by only 30 percent of funds that use the negative screening method.
“When portfolio managers try to run an ethical portfolio based on avoiding controversial sectors, they may find that investing in firearms, dirty energy and gambling can be more acceptable than adult entertainment,” wrote Bloomberg reporter Tassos Vossos.
Last year, the “ethical” New Zealand-based fund Simplicity KiwiSaver found that its investors were more “worried” about investing in porn than in firearms manufacturers. “But it's a groundless fear. There are virtually no listed pornography companies,” noted the New Zealand news site Stuff.
As far back as 2010, the right-wing Witherspoon Institute published a paper stating that ethical investing was once associated “with causes like combating South African apartheid.” But now, the conservative think tank recommended using “ethical” investment principles to fight the supposed “harms” caused by porn. Apparently, a significant percentage of investors now agree.
