Ethical Investing/Trading

[chops_a_must]

This came up in conversation on another topic, so I am interested to know how many people take into account ethical concerns before they trade or invest. I am actually a little surprised I couldn't find a thread on this topic.

For those that do take into account ethical concerns in their trading and investing, I'm wondering what model or framework your decisions are based on. Is it primarily focussed on environmental, social or other concerns? And how do you rank the importance of each?

To those who don't take into account ethical concerns, (and I'm not going to judge you on this - I wouldn't be able to handle it here if I did) is there any reason you don't take ethical concerns on board? Or do people who don't primarily base decisions on their ethical framework, will you conceivably at some point base a decision on ethical concerns? i.e. a company does something so bad that you just can't ignore it. And would you have an idea of where this may cut in, at what level?

But there is also a more important question I guess. In that, is there such a thing as ethical trading? It is fairly obvious there can be various forms of ethical investing, but does the inherent nature of trading at some fundamental level make it unethical? I would argue no, but would like to canvas the thoughts of the people here.

Thanks for taking the time to read and reply, in advance.

Cheers,
Chops.

 

[Pat]

Good thread. I hope to find ways of trading ethically, if it can be done.
Ethics don't have an impact on my trading. I trade to make $$$ that’s it. I suppose I/I'd feel guilty investing in a company which did/does something or contributes to something unethical (make sense?). If drastic I'd sell, and complain!
I invest in mining co's that destroy untouched land etc. This will occur anyway, wether people invest or not... we need to take from the land to exist as we know it.
Human rights etc don't have a clue with the market.
From what I know only some company's are trying to exist in a carbon neutral way. I work for a financial co that attempts to be carbon neutral by giving to charity, re-forestation etc. However they also sponsor some sports that emit $hit loads of carbon. With our managed funds, we have a disclaimer that states ethics of any kind are not considered in our investments. Only 1 fund in they many is considered an ethical investment. Well... at least it's a start. That’s the biggest step IMO.

 

[theasxgorilla]

Per se I don't factor this into my trading. On the other hand, last year I could have bought CEY based on technicals but I chose not to based on the whole global warming situation. It didn't seem wise to be investing in a company that mined such an unpopular product. Ultimately that is not why the share price eventually collapsed though...so in that instance it was really neither here nor there.

At the moment I believe that the drive for ethical business activity needs to be aligned with the chase for profits, and it seems this is increasingly the case. Leading companies like BMW seek to differentiate themselves by it. Their latest 1-series slogan here in Sweden is, en sekund snabbare, en liter sparas...one second quicker, one litre saved. But make no mistake, they're in business to stay in business, and so they ought to be.

If they're successful it will show in their profits. Assuming we as consumers have proper education on the matter and the information we're feed is real then I believe that we can rely on the conscience of the consumer to eventually correct un-ethical business activities. Australian consumers are particularly aware of environmental issues and what can be done on a day-to-day basis to live more ethically.

So as long as we as individuals maintain a conscience and live well at the consumer level and keep trading like traders (ie. chasing profits) then eventually the market ought to sort out the unethical companies via declining profits and share prices, right?

 

[chops_a_must]

Per se I don't factor this into my trading. On the other hand, last year I could have bought CEY based on technicals but I chose not to based on the whole global warming situation. It didn't seem wise to be investing in a company that mined such an unpopular product. Ultimately that is not why the share price eventually collapsed though...so in that instance it was really neither here nor there.

Nice post once again. Just a couple of questions:

Did you replace that trade with another? And if there wasn't another trade on the go, would you have taken the trade on CEY?

Ethical investing/ trading is an area where I think Pascal's framework for decision theory can be applied quite well. I'll come back to that one.

I invest in mining co's that destroy untouched land etc. This will occur anyway, wether people invest or not... we need to take from the land to exist as we know it.
Human rights etc don't have a clue with the market.

Your first point is valid and leads to an environmental dilemma. On the one hand mining damages the environment, and on the other, you need the resources from mining to develop the products that help the environment. A lot of them need huge amounts of platinum, palladium and even lead. Solar panels need heaps of silicon and silver for instance. But do the benefits from mining these products have a more positive impact than the damage done from actually mining it? Probably yes. So environmentalists in my eyes should look positively on precious metal mining. But it is something I have had fiery arguments about.

Human rights and markets are a tricky one. At what point does developing the third world becoming exploiting it? It's a fine line...

 

[theasxgorilla]

Nice post once again. Just a couple of questions:

Did you replace that trade with another? And if there wasn't another trade on the go, would you have taken the trade on CEY?

I bought CGF instead. It seemed counter-intuitive at the time as they were not in the materials sector which is where a lot of the spectacular trades were being made. Turned out to be a good trade in the end though. Still yet to differentiate between luck and smarts though

 

[chops_a_must]

I bought CGF instead. It seemed counter-intuitive at the time as they were not in the materials sector which is where a lot of the spectacular trades were being made. Turned out to be a good trade in the end though. Still yet to differentiate between luck and smarts though

Interesting then that you say you aren't affected by "ethical" choices at all. I think most people presented with two potentially equally good trades, who know the sector in which these stocks are, would choose the less "harmful" one.

 

[purple]

I daren’t say that there is such a thing as ethical trading!

The whole lot of pharmaceuticals are unethical as they muscle out other holistic/natural theraphies and any other competition. Evil are all who have traded CSL!

Uranium miners are environmentally evil!

When you sell at the peak to someone else who then sustains the loss, that’s unethical too?!

 

[theasxgorilla]

When you sell at the peak to someone else who then sustains the loss, that’s unethical too?!

But you never know its the peak until after the fact. Its possible that AT a peak ALL holders of a stock are in a non-losing position...if only temporarily.

 

[chops_a_must]

I daren’t say that there is such a thing as ethical trading!

When you sell at the peak to someone else who then sustains the loss, that’s unethical too?!

This is the main argument I came up with in my own mind about trading being fundamentally unethical.

However, trade by definition is an exchange of goods or other between 2 or more parties, acceptable or mutually beneficial to all involved. But, with share trading, it is faceless and there is an instant pay off or loss. Which leads then to the question; is it the way in which shares are traded or obtained/ discarded rather than the trading itself, that becomes unethical?

 

[purple]

This is the main argument I came up with in my own mind about trading being fundamentally unethical.

However, trade by definition is an exchange of goods or other between 2 or more parties, acceptable or mutually beneficial to all involved. But, with share trading, it is faceless and there is an instant pay off or loss. Which leads then to the question; is it the way in which shares are traded or obtained/ discarded rather than the trading itself, that becomes unethical?

hm...

But you never know its the peak until after the fact. Its possible that AT a peak ALL holders of a stock are in a non-losing position...if only temporarily.

hmm....

this is getting deep. where's me cheesecake? lol.

now then...how many of us have 'looked the other way' when we see a beggar? or 'switched the channel' when the screen shows a malnourished child in Africa? lotsa us.

i think this questions transcends trading into our daily lives.

but the fact is that we are all not without sin. (who trades to get money to give to his neighbour?).

I daresay that we are all trading with ethics swept under the carpet, especially since we don't have to face up to anyone (faceless, instant payment).

ok, disclosure : I have traded CSL twice.