Conscious capitalism goes by many names: socially responsible investing, ethical investment and, increasingly, sensible investment. The funny thing is, many investors are hesitant to admit they reflect their values in their investments, though they clearly do. For example, Warren E Buffett ran the textile business of Berkshire Hathaway for many years in part because it was a major employer in the local area… sounds socially responsible to me! We all have different values but socially responsible investment gives you more bang for your buck. Here's why:
1) Investments are about more than just money. While its true that ethical investors habitually beat non-ethical investors, they also gain significant non-monetary benefits. Happiness results not just from money but also from a sense of empowerment and altruism. If you have ethics then there is nothing to stop you reflecting your values in your investments. Unlike the size of your bank account, that is something to be proud of. Responsible investment funds under management have increased by 30% since 2011 – with a lot of those new investors being relatively young. If you want to take advantage of that trend, you could always invest in Australian Ethical Investment Limited (ASX: AEF), although I warn you the company gives 10% of its profits to worthy causes.
2) Responsible investors make more money than other investors. It is a well-kept secret that we ethical investors are taking money from the rest, as this 2013 scorecard shows:
3) As investors desert particularly harmful companies like marginal coal miner Whitehaven Coal (ASX: WHC), the last ones invested will end up holding the stranded assets. AMP Limited (ASX: AMP) announced yesterday that its responsible investment funds would dump certain fossil fuel companies (such as Whitehaven) and fund manager Hunter Hall Limited (ASX: HHL) has done the same. Whitehaven has begun clearing the Leard forest in winter (thus causing more animal casualties) and will probably build its new mine.
