The Ethics of Investing

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.