Over the last two years we’ve written a lot about sustainable investment (AKA ethical, responsible, impact, thematic, clean, etc.). With financial trade outstripping real trade 26:1, it is in the world of investment that we will create a viable future.
In writing about this subject we’ve identified five types of investor.
Profiteers know the damage being done to people and planet by their investments and do it enthusiastically to maximise their return. Some actively seek out the most harmful investments as it’s ‘just a game’ and the winner has the highest returning portfolio. From the dark days of slavery, through dubious corporate behaviour in the world wars to the current threats to our well being and environment, profit maximisation is the only game in town. At any cost. Profiteering simply means “making a profit by methods considered unethical“. How could investing in companies that harm the planet and increase the amount of human suffering be anything other than unethical profiteering?
The Nose Holders
Nose Holders know that what they invest in has an unpleasant aroma (often literally) but will do it anyway. They rationalise their own urgent need for a better return, or qualify that individually they can do little to effect social and environmental change or that to do otherwise would simply be too difficult or time consuming. This group often express regret about what they’re doing but their remorse is easily over-balanced by personal financial priorities and gain. It stinks, but not if you hold your nose.
The important thing about the first two groups, is they know the damage they are doing with their portfolio and either choose to embrace (profiteers) or ignore it (nose holders). Fortunately these first two groups form a minority of investors. The next two groups form the majority of private investors.
The Three Wise Monkeys
Three Wise Monkeys suspect that something is amiss with what they’re investing in but would prefer it if it wasn’t spoken about, especially in polite company. As long as they hear, speak and see no evil about the end result of investment, they’ll be just fine with what they invest in. Thank you very much. They will either adopt the ignorance defence of the following group (the unaware) or the rationalisation of the former group (nose holders). If approached in the right way, Three Wise Monkeys investors can often be encouraged to start their journey towards less harmful investment.
The Unaware simply haven’t made the connection between their investment portfolio (from ordinary savings account through to multi-asset strategic fund) and the world we live in. The most common response is, “I had no idea”, when the connection is gently explained. At this point they tend to float towards Nose Holders (“I need the return”), Three Wise Monkeys (“I don’t want to discuss it”) or, more often than not, the final group below.
The final group are the Enlightened. This is the group that has made the connection between what they invest in and the world we live in. They know that by holding a stake in defence, tobacco, alcohol, gambling, pornography and fossil fuel companies, they would be increasing the sum of human misery and harming everyone’s future. Rather than grabbing that extra 0.1% today, they see investment as a highly involved, long-term activity that has huge negative ramifications if done irresponsibly. And why invest in misery and pollution when there are so many positive alternatives. The motivations for investing in this way are legion, and options plentiful from strictest exclusion of harmful sectors to a focus on beneficial ones. In the long run, these investors have a clear conscience and a healthy portfolio. They profit but don’t profiteer.
One of the charges regularly leveled at enlightened investors is that they invest “with one arm tied behind their back“. If having an arm tied behind your back means not investing in companies that kill or abuse people or degrade our environment, threatening our future, then so be it. Enlightened investors choose not to profit from human misery and despoiling the only planet we have. At some point, an investment enlightenment perhaps, we will probably come to realise it is an outrage to do so.
So, what kind of investor are you? You can start to explore how you can invest more sustainably with a specialist financial adviser.
* We toyed with the idea of psychopath for this group, who are generally characterised by shallow emotions, stress tolerance, lacking empathy, cold-heartedness egocentricity, superficial charm, manipulativeness, irresponsibility, impulsivity, criminality and antisocial behaviours.