If you’re an investor, and if you want your money invested in companies that will bring you not only a return on investment, but will also do some good in the world, that means you’re interested in what is variously called “responsible investing,” “ethical investing” or “values-based investing.”
I was recently interviewed for Responsible Investing: An Evolving Story, a documentary on the topic. The 20-minute video was produced by the Ontario Teachers’ Pension Plan (OTPP). Known colloquially as “Teachers,” OTPP is one of the biggest institutional investors in Canada, with just over $100 billion dollars under management.
One of the main points I tried to make in the interview is that the key to thinking about values-based investing is to think of it as a mechanism for value-alignment. That is, it’s a way for investors to invest in companies whose values are like their own. It allows pacifists to avoid investing in arms manufacturers, and allows anyone who is stridently anti-tobacco to avoid investing in that industry. It’s not about all of us investing in products or industries that are “more ethical,” overall. Such global judgments are difficult to arrive at, and even harder to find consensus on.
That is, it’s best not to think of values-based investing as “ethical” investing, as if in contrast to all that other, unethical, investing. Indeed, referring to it as “ethical” investing probably makes the same mistake as do references to “ethical oil” or “ethical food”: it confuses the fact that there is ethical reasoning involved in such investing with a much grander claim that your investments are the only (or most) ethical ones.