Investing, just like any other form of financial transaction, has its own set of ethical boundaries. The topic of whether financiers are bound to a defined code of conduct is a subjective one that has raised some difficult questions for regulatory agencies. Nonetheless, individuals who are new to the realm of investment and trade need to grapple with the right and wrong of certain actions and their respective motives and consequences.
A Definition of Ethical Investing
At its simplest, some people consider an ethical investment to be one that is purchased from an issuer who acts ethically. As a new investor, it is your job to decide on a set of abstract criteria that can be used to determine what code of conduct you consider to be ethical. For instance, a religious person lives according to a moral compass that is influenced by their leaders and Holy texts. To apply the aforementioned example to the realm of ethical investing, a Christian financier would most likely avoid purchasing shares from Playboy because of what the Bible teaches about sexual immorality. Similarly, you will need to establish the ethical terms on which you will base an investment decision.
The above can be quite difficult to do when making real-life investment choices. To carry on with the religious context of ethical investing, the Bible condemns drunkenness in several passages. Does this mean that a Christian investor should unconditionally steer clear of securities issued by makers of alcoholic beverages? Since not all alcohol patrons get drunk off of their purchases, it would be up to the Christian investor to make a judgement call on the ethics attached to those types of shares. In fact, one could even go so far as to say that virtually all issuers of insecurities do something that a large percentage of their investors don’t agree with. So which principles are tolerable to investors and which are not?
5 Common Ethical Issues Associated with Investing
Winning at someone else’s expense – There will always be losers and winners in a free market economy. The problem comes in, for some, when industry monopolies (however efficiently they may run) prevent any form of healthy business competition. Some investors consider this type of corporate behaviour to be unethical.
Environmental responsibility – There is a modern stigma that has linked heavy energy and manufacturing industries with the demise of nature and wildlife due to the inordinate amounts of pollution they produce. Ethical investing in this case would be opting for companies that adhere to government standards for emissions.
Abortion and stem-cell research – Companies that profit from these types of medical procedures would be deemed unethical by a large proportion of religious investors. Some might even call them criminal!
While ethics will always be a subjective subject by nature, it is each and every financier’s responsibility to consider the morality behind their investing. You can start by consulting your financial advisor. Good luck!
Bella Gray is a finance blogger who deals with forex brokers on a daily basis. A maestro of tips and strategies for navigating the forex market, Gray is the go-to-professional for all your trading tips and solutions.