Poll: The Market Has No Conscience 😈

by 10 Jun, 2020

Poll: The Market Has No Conscience!

“Are you investing to make the world a better place?”

  • 57%:   Yes
  • 43% No 

From Black Lives Matter to climate change, everyone’s got something to fight for at the moment. The advent of socially responsible investing (SRI) means our community is prepared to make money talk… just. The Invstr community is largely split in one of our most contentious polls to-date! 

The dilemma is whether to restrict the investment universe and give up gains to do something that we’re not sure will have a tangible impact. It’s a reasonable concern, so let’s clear up how ethical investing works, once and for all.

If you invest in a company on the stock market, it doesn’t get your money. You’re trading with another investor, like in a giant flea market. The only way to invest unethically is to buy shares in a company you don’t like that either plans to raise funds soon, or whose management gets paid in stock options. 

There are Socially Responsible Investing (SRI) indexes that suggest to you a corporate blacklist, but Environmental, Social, and Governance (ESG) scores have less to do with ethical investing. These are scores for how well companies are protected from these types of issues around the world, not at risk either through luck or skill.

When it comes to ethical decision-making as an investor, let’s say there’s a tobacco business that looks like an excellent investment from almost all angles. It’s heading into a new market. You don’t feel good about entrusting your cash with its managers, though, who’ve expressed some views you disagree with – that tobacco isn’t bad for society.

Those higher-level employees might have some insider ownership and get paid in shares of the company, but they’ll only qualify for those ‘stock options’ if the stock price reaches a certain level. If you don’t want to help managers along with their stock options, divest!

In another example, let’s say you find a coal firm that screams “buy, buy, buy!” but you quickly realize it needs to fund a new mine. It plans to issue a boatload of new stock to the market, the owners needing a high stock price to raise the most cash. Knowing this is a harmful mine, you decide not to help it along, and you decide not to invest in the stock.

You can achieve ethical investing on a huge scale in one swoop. Just go for an ‘ethical index.’ We host the ‘SPDR S&P 500 Fossil Fuel Free’ on Invstr, which keeps you out of dirty energy. Its performance is almost identical to the standard S&P 500 index.

We also have the ‘SPDR SSGA Gender Diversity’ index, which only includes companies with a high percentage of women in positions as executives and directors. 

In sum, 42% of the Invstr community might not have as much to lose from going sustainable as it thinks it does. We can all make a difference, and thousands of stocks mean thousands of ways to make a statement, not just a fortune!

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