The Ethics of Investing. Making Money or Making a Difference?

Abstract: The concepts of ‘ethical’ and ‘socially responsible’ investment (SRI) have become increasingly popular in recent years and funds which offer this kind of investment have attracted many individual investors. The present book addresses the issue of ‘How ought one to invest?’ by critically engaging with the ideas of the proponents of this movement about what makes ‘ethical’ investing ethical. The standard suggestion that ethical investing simply consists in refraining from investing in certain ‘morally unacceptable companies’ is criticised for being both too rigid (often resting on absolute moral rules which lead to an austere conclusion) and too ineffective for individual investors (investors who after all control only a small part of the investment universe). Furthermore, the idea that ethical investing could consist in engaging more actively with the companies one invests in, in order to make them change their ways and become more socially responsible, is criticised for being just as ineffective for individual investors. Some more radical alternatives are elaborated on and defended – for instance, the suggestion that investors should make as much money from their investments as possible and then donate the proceeds to socially worthwhile charities. From similar suggestions, the common idea that there is no conflict between morality and profitability, or that genuinely ethical investing can be just as profitable as mainstream investing, is criticised for being too naïve. Making a difference may indeed require personal sacrifice of investors, but it is argued that the needs of the possible recipients of philanthropy are morally more important than the luxury of investment returns.