Socially Responsible Investing: What Does Ethics Have To Do With It

Socially Responsible Investing

The concept of being ethical looks different depending on who you ask. Everyone has their view on what they feel matters most, and sometimes, these viewpoints conflict. Opinion and personal values are individualized constructs that are not easily changed by sharing contrasting views.

When it comes to socially responsible investing, applying ethics can get tricky. Given that ethics are frequently debated, defining what is most important in the context of ethical investing can be challenging. Business priorities, for instance, may be to reach a financial goal, and sustainable investors may wish to invest only in sustainable companies.

Finding a way to work with these contrasting goals sounds difficult, but thankfully, ethical investing follows a format that makes quantifying sustainability measurable and void of opinion. This article will discuss what ethics have to do with socially responsible investing and how you can apply universal values to make the best decisions for your investments. Read on to discover how sustainable investing and ethics combine to produce the ethics of socially responsible ETFs.

The Ethics Of Socially Responsible ETFs: The General Ethical Investing Framework

To bypass opinion, ethical investors can utilize principles that are universally accepted. Following “the golden rule,” for instance, allows investors to consider their investment choices and the companies they work with based on their total impact on society, the environment, and the world. With the intent to do no harm, the ethics of socially responsible ETFs is preserved. Ethical investors can use quantification to provide a dollar amount for the benefit to the harm of a company’s influence. Ultimately, ethical investors can compare the ratio and proceed with the decision that best supports humankind.

A System For Quantifying Values Makes Ethical Decision-Making Straightforward

Opinions become irrelevant by relying on a measurable format for investment-related decisions; a utilitarian perspective is predominately utilized through quantification. Ethical investors that need experience quantifying their investment options or how these values should present themselves in an investment portfolio may find it helpful to work with a seasoned firm familiar with this process. While you cannot quantify the value of human life, the ethics of socially responsible ETFs align with the universal view that human impact is a highly prioritized ethical value across every other ethical stance; therefore, companies that strongly threaten human life should be removed from investor portfolios and, ideally, not put there in the first place.

Some examples that promote more harm than benefit and are not within the scope of the ethics of socially responsible ETFs include:

  • Tobacco and cigarette companies
  • Work done in lithium mines
  • Factory work that creates significant air pollution

Apply Ethics To Your Investments Using Ratios

Following the golden rule entirely is impossible. Every business produces positive and negative effects on society, the environment, and the world. The goal for ethical investors is to apply ethics. So they can see that a company is doing more good than harm. In this way, the ethics of socially responsible ETFs can take place in a sound and opinion less way.