This article was written in 2011, long before ESG funds exploded, before AI became a moral dilemma, and before every corporation hired a sustainability consultant to greenwash their annual report. What used to be a quiet, niche investing debate has since morphed into an industry: one now under scrutiny for misleading claims, weak standards, and more than a bit of hypocrisy.
I had a look at one of my older posts, Vultures, and while it is an interesting rant that fires in all directions, the first comment made me think about something I keep hearing about these days: the concept of Ethical Investing.
The commenter in that specific post pretty much called me a scum bag for investing in banks, which, given my rants about how terrible the service is that Banks give, makes me more of a hypocrite than a scum bag (IMHO), but I only bring this up to start the discussion.
Yes, I do invest in the Canadian Banks, mainly because they do seem to find new and exciting ways to make money, most likely in a way that screws regular folks royally, but I don’t have an issue with that. But that is pretty much where I draw the line for investing. You might ask what I don’t invest in (directly, I may invest in these because I hold many index funds and ETFs that may spread funds to these industries/areas):
- Payday Loan companies: interesting that I will invest in banks that make a fortune off consumer debt through credit cards and bad loan terms, yet I don’t want to invest in Payday Loan companies, which are just a much smellier part of the same financial compost heap. I am a complicated guy that way (or a hypocrite, as I am sure someone will point out). Remember, EQ Bank is one of those companies.
- China: I am staying the heck away from China and Russia, just because totalitarian governments worry me, and what they have done to their populations makes me leery of giving them my money.
- High Tech: This is primarily a once-bitten, twice-shy scenario, where I have lost enough money in this area in my younger days, and frankly, the scum bags who run some of these companies are really in the same category as a few dictatorships I have read about. This means AI and that area as well.
- Carbon Footprint Offset Funds: I don’t understand it, and I really don’t trust any of it. I think I’d rather invest in Sanitation Companies before I get into this Green Shell Game.
I do not go out of my way to live up to the high ideals I have set, but I do try to steer clear of these areas (and others that seem shady at best). Is this Ethical Investing? Somewhat, since it is my own ethics that I am following, but I think it is not Big E ethics, more small e ethical investing.
What areas do you stay away from, and are you a Big E Ethical Investor, or a small e?
Ethical Investing Hypocrisy Redux
Ethical investing used to be about avoiding tobacco and landmines. Now it’s a sprawling branding exercise where every company claims to be “green,” “sustainable,” or “aligned with human values,” usually while firing half their staff and outsourcing the rest.
The honest approach is what was hinted at: accept that ethics are personal. Avoid what bothers you, invest in what doesn’t, and don’t let guilt stop you from using low-cost index funds. You’re not voting for world peace with your TFSA, you’re just trying to retire before your knees give out.
🚩Red flags in ethical investing
- High MERs -> some “ethical” ETFs charge double for the same holdings. OK you might need some extra research, but double?
- Vague criteria -> if the fund excludes “bad actors,” but can’t name them, run. Know your enemy.
- AI funds with no transparency -> huge red flag as companies scrape data without consent. No such thing as copyright any more?
FAQ Ethical Investing Hypocrisy
Investing using your personal moral, environmental, or societal values as filters.
Depends on your values. They profit from consumer debt but also contribute to Canada’s financial stability.
Payday lenders, tobacco, weapons, surveillance tech, authoritarian regimes, AI firms with questionable data practices.
Not really. Not with significant index funds holding everything under the sun.
It depends on data transparency, labour practices, and intent. Many firms score poorly.
I see nothing about investing in the Big 5/6 as ‘unethical’. If anything we have no choice in Canada but to deal with one of these companies for a myriad of reasons. As investors we might as well get a return via a stable and growing dividend. If you can’t win, join!
Long: CM, BNS, RY
If I had more cash I would certainly be long TD and BMO.
I always look at how a company makes it money before I invest. I do not invest in tobacco or Pay-Loan type companies. I do look around the net to see if there are negative comments.
I once did not invest in a retail stock because I found lots of negative comments on how it did business. I felt I might be better off with another investment instead.
Nice post. I don’t do tobacco. Liquor, like LIQ, that works 🙂
Great post. I myself have been sharing my opinion on ethical investing on my blog lately. It is really important to me and something that I like to advocate for. I would say I am a big ethical investor. I would rater forgo some profits than to make “dirty money”. I would like to do what I can to help those companies trying to be sustainable. It is what sits right with me.
Clearly, ethical investors will frequently disagree about specifics. However, I believe that if everyone does invest according to their personal values, then, since so many of core values are alike — and are supportive of higher ideals — that in the long run, only companies employing these higher values will truly prosper.
Serious, unbiased studies do show that in general, long-term returns on ethical investment portfolios are as good, and sometimes better, than with most regular portfolios. See this page on my Canadian ethical investing site . {link removed}
Also, surveys all-over-the-world show that most investors want to invest in ethical companies and don’t want their investments being the cause of grief to others.
I’ve been following ethical investing for some forty years.
I’ve been investing 3% of my income in “ethical investments†rather than giving it to charity. There’s a couple of green tech start ups i’ve invested in that haven’t done to bad. I feel i’m getting a better ROI