Are there corporations in which I can invest with a clear conscience? I would like to save money for the pension and invest in the stock market, but I am not sure which companies act sustainably, committed to environmental protection, pay fair wages, do no animal testing and so on. I realize that perhaps I will not achieve the highest return with this strategy, but ethically correct action is more important to me than good profitability. At best, I would like to invest in an ethically correct ETF.
This is a good question, not just because corporations have been known to have environmentally destructive practices.
However, no two ethical questions, even just about pollution, are really the same. There might be some computer company gaining ground near you, and they might be looking for investors. You go and talk to them, and they say "our company does not pollute the environment", but then with a little digging you find out that they conduct all their business practices through companies that do. There isn't always a way to find out if what a company does goes against the type of world you want to live in, you have to do the research yourself. Now is probably the easiest time in the history of finance to find this type of information out.
And then there is another problem: isn't the overall prospect for success (i.e., returns on stocks and other financial instruments) also in a way an ethical concept as well as a selfish one? There are a lot of risky financial products out in the world of investing.
To be listed, a company must explain its operations in considerable detail in its prospectus. You may read these at your leisure and determine whether those operations and motivations are aligned with your beliefs and interests. I don't believe it's possible to answer this question any more specifically than that - your conscience is your own and doesn't align with anyone else's; it's up to you to determine whether a business' actions agree with your principles or not.
One problem to consider with this is that a company may meet 95% of your conscience requirements but may be missing something. Only you can decide what compromises you are willing to make, if any. There are many great investments all over the conscience spectrum.
The bigger problem I see with your question is that business is very global now. Even if you find a company that meets your requirements it is likely they do business and support one or more business that do not. How important is it to you and to what level do you take this conscience investing approach? If I like company A and they do everything I look for as a conscience investor but they source materials from company B that pollutes the environment and uses cheap foreign labor then is company A really all that great?
There are socially responsible ETFs, a Google search will return plenty of information. I would suggest something like that versus digging into each company individually.
+Andi, I’m sorry I can’t put this comment where I wanted to, because I don’t have 50 reputation points.
After your opening questions, which have been so well answered by others, you asked a couple more in response to +thinksinbinary.
To your question: “Why should buying stocks be selfish?” You gave yourself a good answer with the first part of your next sentence: “you have to have your own profit in mind”.
Regarding “indirectly creating jobs” : if you contribute to a company’s initial offering (IO) you could perhaps claim some high-ground, but if you buy shares through the stock market you should understand that any existing jobs have already been created (ie nothing to do with you) and any future jobs will also have nothing to do with you.
It is nice to be ethically concerned, but it is even better to be see clearly what you are doing, where you are going and how you are REALLY impacting on your world.
I have seen hypocrites who fancied themselves as “ethical”, and I have seen others who don’t fancy themselves at all, but who are in fact most ethical.
Warren Buffett has no problem investing in Coca Cola. He sees the product for what it is - a popular, unhealthy, sugar drink that BILLIONS of people love. It has been a good investment for him. He makes billions of dollars and gives generously to ethical organisations all around the world. He is comfortable with that. He doesn’t view his activities as incompatible.
It’s really nice to want to invest in companies that are “ethical”; however, as others here have pointed out, you need to find your own way in this. By all means avoid companies that are unethical by your assessment, but also be wary of those that present themselves as “ethical”, but may not be, and are not there in your interest. The majority of companies, no matter where they fit on the philosophical spectrum, are destined to ultimately disappear. If you continue to trust such companies to the end, regardless of their claims about sustainability and being nice to animals, they will take your money with them when they go.
It is very difficult for shareholders to get a fair return even when they prioritise doing so. When you say “ethically correct action is more important to me than good profitability” it sounds beautiful but you need to be careful that you do not mistake “good profitability” with “no profitability” or “negative profitability”. In the latter cases you will likely do better with your money by donating to your local food kitchen. That way, at least you’ll know where it has gone.
When you say you would like to invest in an ethically correct ETF it sounds like you want someone else to do the deciding on the careful balance between ethics and profit. Be careful with that. In the business of investing there are few shortcuts except giving your money away. There will always be others who say they can do better with it than you.
In the investment world, as elsewhere, you need to work assiduously at becoming the master of your own destiny.