Ethical Investment Funds: A Good Buy?
By Staff News & Analysis - November 12, 2009

With National Ethical Investment Week about to start, Sarah Pennells guides newcomers through the three main types of fund and suggests where to go to find out more. You recycle, switch off lights and have a water butt. But is your wallet green? Tomorrow sees the start of National Ethical Investment Week (NEIW), a campaign designed to spread the message of ethical and green investing. Only 8% of people invest ethically, although 33% of those questioned by YouGov for NEIW said they would consider it in the next five years. Ethical investing can be tricky to get to grips with if you are a first-timer. With dozens of different funds and some off-putting jargon, it is not surprising that some just plunk their cash in the first fund they come across. But this is not the route to investing happiness. You might end up with a fund that bears no relation to your own ethical views or one with a great track record in … abysmal performance. You do not need to be an ethical expert to invest £50 a month in an Isa, but it helps if you understand the basics. There is no foolproof way to categorize funds because they tend to overlap, but they can be – broadly – broken down into ethical, green and engagement funds (which put pressure on companies to improve their behavior). Don't expect funds in the same category to invest in the same companies: it will be down to their focus and investment approach. Ethical funds either refuse to invest in certain companies or sectors, positively invest in others, or both. Those on the banned list will vary but could include cigarette and alcohol producers, armaments manufacturers and businesses supporting regimes with a bad record on human rights. – Guardian UK

Dominant Social Theme: A better way to invest?

Free-Market Analysis: NEIW is almost over now, but we hope a lot of people feel better because they have either participated or have thought about participating. That's mostly what the week is good for in our opinion. Sorry, don't mean to sound grouchy, but this kind of institutional morality, especially as it involves investing, doesn't really tug at our collective heartstrings – and certainly not our purse strings.

While we believe that putting money into a charitable cause is certainly worthwhile (depending on the cause), we wonder whether one can institutionalize the process on a large scale. Examples? We are old enough to remember when Rhodesia was on everybody's list of countries to boycott and to hate. In fact, Rhodesia was boycotted and finally the many whites that lived there gave up for the most part and moved away.

Eventually, Rhodesia became Zimbabwe. What had been a country where whites believed for the most part they were better than blacks became a nation where black leaders murdered, raped and pillaged other blacks on a regular basis. A few wealthy black leaders sucked out the entire gross national product of that miserable country year after year while more and more citizens ate grass. It still hasn't recovered.

What we are trying to say here is that when it comes to institutional charity, especially the kind which makes moral judgments, we tend to think that complexity often over-runs good intentions. Local charity, especially the kind that helps people in town down on their luck are admirable indeed. But funds that attempt to sort out the world by whether or not companies make tobacco products or invest in this regime but not that one are approaching the world with a word that begins with M, all right – as in marketing.

We have nothing against charity. People should help other people, in our opinion. Little acts of kindness contribute mightily to the fabric of civil society. Whole religions have been constructed around this idea. Of course there are other points of view. Ayn Rand believed that even private charitable donations were contemptuous, so far as we can tell. But we make a different distinction based on Austrian economics not what Murray Rothbard called (referring to Rand-ites) a "cult." Human beings probably have the most complex inter-relationships of any creatures on the planet. Our lives are spent spinning a complex web of relationships. And if someone wishes to make a donation with his or her own money or time and effort, who are we to say it is misguided.

The emphasis ought to be on private, however, when it comes to charity, and just as importantly on the personal. Free-market economists have often noted that as public involvement in society goes down (as government shrinks) religion and private charities swell to fill the space. Likewise, when government becomes more intrusive, private charities and religious institutions become less important. One can plainly see this phenomenon has taken place in America, which used to have a far more robust network of private, local and regional charities and meaningful religious institutions than it does today.

Meanwhile, since we are a publication – the only one of its kind – that regularly points out the monetary elite's dominant social themes and how they interact with the free-market, we are impelled to make the observation that Western institutional morality parallels these themes in an eerie kind of way. Institutionalized ethical investing, so far as we can tell, mimics the elite's entire set of themes, from global warming, to energy conservation and far beyond.

Why does the ethical investing industry tend to track and reinforce the elite's dominant social themes – the ones they promote to increase their own wealth and control? We would venture to say that it's because the elite has a virtual stranglehold on the financial industry. It certain doesn't hurt an elite promotion to have it re-promoted within the echo chamber of "ethical investing."

There are plenty of good causes that one can subscribe to locally without having to search out funds that boycott this or that product, or invest specifically in green energy solutions that may or may not be worthless. In any event, if we were to invest in a so-called ethical fund, we would want it to be one that was helping to promote a private-market gold and silver standard that would take the place of central banking and fiat money. We haven't stumbled across one yet. Email us if you know of one. Maybe well even start one ourselves?

After Thoughts

Our problems with ethical investing begin with the similarities between what the ethical investing industry offers and what the monetary elite is promoting for its own purposes. Our difficulties are increased by the perception that ethical investing may misfire mightily (as can be seen by the Rhodesia/Zimbabwe situation) and are further reinforced by the notion that charity begins at home. A final reason to look skeptically at these so-called ethical-investing funds? Their track record is terrible on the whole. You're not getting what you're paying for with these funds, in some cases, and even when you're getting what you're paying for, you're paying a great deal for it! Doesn't sound like a bargain to us.

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