How much does a company’s ethics influence you?

Just wondering how much this influences you?

I don’t want this to descend in to a debate about what is right or wrong but think it’s an interesting topic.

I steer clear of certain stocks that I clearly associate with harm: tobacco, oil, alcohol, gambling.

But then it becomes difficult as to where you draw the line. How much can you ever really know about a company. If you think enough about it it’s reasonable to justify many companies causing harm.

It’s a minefield!

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I asked a very similar question on another forum as my own answer became confused.

Growing up, I was against oil and tobacco but have invested in oil over the last 2 years. I wish to remain out if possible but a bit late and hypocritical now of me. Better late than ever for my own personal views.

On the flip side, I invest a lot into defence companies where allowed, and others often frown upon this but I’m quite supportive of these companies for the most part (not entirely).

I do avoid tobacco.

The more recent one is interesting: Cannabis. It helps some, it’s becoming more legalised and accepted elsewhere, but needs more medical research and to understand the second-hand implications of use. So I’m still on the fence and have a very minor stake in these types of stocks.

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Ultimately I think this is all very much personal choice. Ethics bar a handful of things its almost entirely subjective. Which means that almost every company in existence is ethical to someone since am not aware of any one company that breaks those very few fundamental more ‘universal’ ethics.

You mention oil, but what’s unethical about oil? its also used everywhere, and when you drill down to companies… what of Shell or BP for example? To huge companies that are also huge green energy companies.

I think there’s also been a bit of a shift from ‘ethical’ companies to looking more at responsible companies possibly because you cannot define ethics for everyone.

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I think the question around oil is due to global warming we should direct attention to heavily develop renewable energy to avoid harm to millions of people and habitats around the world.

I’ve already descended this in to a topic about individuals ethics and world view. Lol.

Let’s try to steer clear of that. Might even delete the thread shortly…

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To answer the question more simply: ethics influence me less than I wish, but enough that it could sway a decision to invest if I was on the fence over a stock in the first place (for other reasons).

If I really like a stock but it’s heavily dubious on ethics, then I will not be swayed to invest.

If ethics are only a small concern, and I love the stock, I’m all in and feeling guilty :wink:

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But I think that’s the point I was trying to make. A companies ethics… who’s ethics are we basing it on?

Thats why I think the ESG approach may be more ideal for this area when considering investing as it has a more structured approach and some base agreement (ish). Obviously that doesn’t cover everything. I also don’t generally invest in tobacco for example but that’s really for personal reasons than some global ethic since I don’t think there’s anything specifically unethical about making tobacco products themselves, it very much depends on how the company is run.

So I would invest in some companies who make weapons for example if they are well run responsible companies, but I wouldn’t necessarily not invest in “weapons” companies as a sector because there’s nothing unethical about weapons themselves (in my opinion).

Shell for example is in a huge transformation process, its an oil company sure, but there’s nothing necessarily wrong about oil, and we do still need it, what matters I think is more about where is the company going? how are they being run?

I hope that makes sense?

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I just want to say thanks for asking the question as I’ve never really thought about it.

Personally as a new investor I’m trying really hard not to invest emotionally. And I’m trying to have the mindset of ‘Money is money’. I guess with things such as tobacco, I think its eventually going to die out or I think there’s room for much heavier regulation (meaning less and less sales over time).

But I guess we all have our unconscious bias in regards to buying stocks.

I think maybe if I had the amount of money to really influence a company then I would consider the ethics of the company but for the time being I’m just here to make money lol

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Interesting topic and a good one! I don’t know where my hard line is but some things that I do/have considered in my portfolio ethically. There are more but a few interesting cases:

Boohoo - Held but then sold. Ethically I struggle with fast fashion and the impact it has from a sustainability perspective. Originally held because I knew there was profit to be made, but the working conditions and subsequent investigations made me bring that hold to an end.

Amazon - Holding. Personally use and enjoy their offering a lot, customer experience is incredible and the convenience is too much to avoid. But no doubt of Amazon’s impact on local/small business, and that really bugs me. Not enough for me to sell, but maybe over time it will.

Electronic Arts - Holding. Big gamer and love many of their games, but I think they are on a dark path with the way they gamify content purchasing, effectively making it gambling. There are very dark patterns to be found in things like FIFA Ultimate Team and the like, which bother me massively ethically and as a gamer myself. I believe regulations will catch up, and that the gaming industry will see sense.

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Tbh I don’t think ethics is a major consideration for me with investing. Partly because it’s very hard to judge which companies are ethical or unethical (I don’t really believe any sectors as a whole are unethical).

But also it often doesn’t seem to have much practical effect. Take tobacco as an example, it’s had probably the most successful divestment campaign and share prices are pretty low but I don’t think that’s led to fewer cigarettes being smoked.

Even the Queen B gets caught out at times… :tipping_hand_woman:

Source unconfirmed.

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If you are a long term investor and maybe are holding something in a SIPP, I can see how its a problem, things like BP and Shell are suspect with their damages they have done to the environment, but they will ironically also be a big part in the future for sustainable energy technologies, so its not clear cut.

If you are trading momentum, and going to sell a few minutes, hour or days later, I am not bothered, I rode the pump up in HMNY (moviepass) even though I knew the business model was a complete scam, but its situations like that, its the game you need to hate…

Love this question, as i’ve thought about it myself at length.

I’ve always felt that ‘ethics’ is so dependent on the individual investor. For example, I would agree with OP that oil stocks are unethical (climate change,etc), but I personally have no issue with alcohol stocks - no denying the damage alcohlism wreaks in people’s lives, but I do feel it’s up to the individual (and more broadly, regulators) to consume responsibly. I’m aware others will disagree with me, we’re all different.

It gets even more complicated than this though, what if an otherwise unethical company is poised well for the future (e.g. low/no alcohol products from alcohol stocks, or the oil companies that invest heavily in renewables?)? I could go on.

I often wonder to myself whether if one goes overboard with ethics in investment, that they might soon run out of companies to invest in; every business will collect skeletons in their closet in their quest for profits. That’s capitalism imo. I can say a bad word of every one of my holdings, but on the whole, I am content with their ethical standards.

That being said, I genuinely believe is that consumers are so ethically focussed that being responsible/ethical will eventually be a necessity when it comes to surviving as a business. I think unethical businesses will have to adapt, or die out. I see signs of this already in several industries (e.g. plant based meat, electric vehicles, low/no alcohol brands), and it’s great to see.

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I like the intention of ESG investing even though it’s not perfect. Some cruddy companies fall into the ESG criteria but it’s better than nothing. I actively avoid investments involving oil, tobacco etc.

However I feel like a hypocrite because I have a position in Boohoo. I like the fundamentals and that’s what’s kept me invested. I genuinely want the company to turn around and will give it a chance to. I will be pulling out if there isn’t genuine change.

The core of my pension is invested in ethical funds where possible.

Just be careful what these ‘ethical funds’ contain. My pension provider’s ethical fund has Nestle as largest holding…

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Yeah so does mine I think (L&G). That’s why I said it’s not perfect, these companies can slip through the “screening” . It’s still better than nothing however!

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Just out of interest. What’s your ethical rationale for investing in products that literally kill people but you draw the line at something billions use for enjoyment every day (applies to any of the 3 you mentioned)?

The fashion industry is a huge polluter but we (as in the ordinary person) don’t often associate them as causing so much environmental damage.

Being honest, I guess I’m a hypocrite with ethics.

I don’t want to invest in oil companies that have wrecked havoc to the environment etc, so I invest in Clean Energy, and yet at the same time I’ll invest in fashion, which probably ruins the environment and exploits low paid labour anyway.

I won’t invest in places like EA, which are terrible companies for the industry (gaming) and introduce so many bad practices (gambling etc), but no doubt I’ll end up having shares through ETFs in places like Nestle, who steal water supplies etc,

So I guess, unless I absolutely know and disagree with a company’s ethics (EA for example), I tend to wallow in ignorance or just get by, so long as the bean counters go green and money is made I suppose. (and saying it like that makes me sound like a horrific person =/)

I think though, in the stock market there are very few companies that will do everything right or even try to outside of paying lip service. The size of some of these places, you are never going to get someone who does everything above board - or it is above board but only in the legal sense. It is a headache, maybe it is designed to be exactly that, so we just discount it otherwise investing would be a nightmare?

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This is a good question. I decided last year NOT to invest in Boohoo when it bombed in July following the allegations of poor conditions in their factories.

I recognised it is a clear entry point because I didn’t see these issues having an impact on young peoples insatiable appetite for cheap, fast fashion. However I felt a little uncomfortable investing given the poor people making the clothes and earning less than the minimum wage in sweatshop conditions in this country!

This did prove to be a good entry point with the stock now up 80% and the long term impact on sales is hard to discern. Boohoo have taken some action to ban the use of subcontractors but ultimately it looks like the market didn’t really care as the stock is still being rewarded. :face_with_monocle:

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I tend not to look at the ethics of a company too much and I focus more on the ethics of the owners/CEO/board.

For example I would never invest in a company that has anything to do with Richard Branson.

The reason for this is that nearly all companies can make a positive spin of their ethics but ethics will still remain secondary to profit.

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