I’ve saved up some amount of cash, but family is poor and hasn’t had useful advice. I feel like the stock market hasn’t been great for society, but surely there are some causes who would use the capital for good (and give it back when I need it later)? I have a half remembered portfolio from a previous union with a big war chest, but it doesn’t feel actionable.
I’m in North America + UK; but answers globally I think are interesting.
BEHOLD! I have actually somewhat looked into this.
So, for buying stock in publicly traded companies, no, you basically can’t make the world a better place that way. Not because “companies must do what is best for shareholders by law” (iirc, this is more of a guideline than anything). But rather because if all the ethical people invest in Solar Panels and Gender Affirming Care For Everyone Inc, then all the ethically neutral money (which is almost all of it) will simply shift more towards Torture Palistinian Orphans Inc. Because everyone is investing based on value relative to price - so rational investors flee the “overinflated” prices of companies with ethically laudable missions. It’s like trying to lower the level of the ocean by filling up an 5 gallon bucket and dumping it down your toilet. You aren’t making a difference. Other water is just going to fill it up. If you want to invest in stocks, just invest in a broad market, low fee index fund, forget about it for 30 years, and forget about your ethical concerns.
If you want to invest in something that improves the world and makes you money, your best bets are
(1) Small local investments. You’ll have to dig here, but there are probably investors in your area who are getting together to give out small business loans. You are basically angel investors, but instead of funding Uber-But-For-Burritos, you are helping that guy in your neighborhood who is good at fixing things start his appliance repair business.
(2) Investing in yourself and your own business. Like, make a restaurant that gives out free burritos, or a clothing company that donated fancy hats to anti-Trump rallies. Its hard for a business to be really unethical when you’re the one running it
So, there’s reasons why “ethical investing” doesn’t work well in practice, but this isn’t really one of them. Industries enjoy a networking effect and efficiencies of scale. Lowering the investing costs of a target industry will naturally improve their growth prospects. And a rising stock price can lure in growth-focused future investors, because investment cash is often dumb and prone to following trends rather than raw performance metrics.
If Good Guys Banking plans to throw $50B into solar panels over five years, that will drive up the price of solar stocks, drive down the cost of solar panels, and proliferate the number of installers and maintenance techs, all of which improve the long term economic prospects of the sector. Neutral investors will want to beat Good Guys Banking to these stocks (accelerating growth of these companies, employment in the field, etc). Retail customers will see more advertising, more local retail sales, and more of their peers getting panels installed, which will induce more spending. And competitors will seek to diversify into Solar in order to capture these gains.
Your real problem is that you’re not a bank with $50B in investing cash to toss around, much less the sophistication to know which solar companies stand the most to benefit from the sudden infusion.
Definitely also good choices. But for the same reasons. Local investment has the double-benefit of ramping up your local economy and providing yourself and your neighbors with more privatized amenities. But it is also riskier. If your neighborhood goes into a downturn, you’re both at risk of unemployment AND big investment losses.
Self-investment has the same problems, only magnified. You’re putting all your eggs in one basket. It’s also much more of a tax on your time, as spending more on your own business means managing more assets and staff directly. If you don’t see profit in this investment, what you’re doing isn’t going to compound your savings.
Thanks to both!
Could you say a bit more on this?
Very difficult for an outside investor to gauge the ethical practices of a business outside the broad brush stuff (war bad, solar good, etc)
The volume of cash you’re investing is likely a rounding error on a rounding error for the business, nevermind the industry as a whole, so you’re unlikely to shift behaviors with your choices
Ethical investing is riff with affinity scams.
It’s hard to gauge long term net benefits of an investment decision, which can lead to “Longtermist” style behavior.