How to Find “evil” Investments Lurking in Your Portfolio
Who owns the corporations that contribute to climate change, practice terrible labor practices and test products on animals? You probably know.
A “bad investment” may, at some level, be an inevitable part of investing in the market rather than in the shoebox under the bed. Maybe it’s good with you. Or maybe you want to put your dollars into investments that are a little more in line with your values.
Obviously, there is no single definition of “evil” here – what is acceptable for one person may be an abomination for another. But you can do your due diligence to find out what you own and if they’re up to no good.
Find out what you value
Any value-based investment analysis starts with identifying what you care about. Racial equality? Environmental problems? Animal rights? Occupational Safety and Health? Determining your values can help you decide what is desirable, acceptable, and unacceptable in terms of corporate behavior. You can prioritize your values to determine what to exclude from your portfolio as well as what types of investments you want to include .
You will also want to consider your preferred strategy. Do you care most about buying companies that share your values and goals? Or do you want to focus more on engagement through shareholder action? Or both?
How to Find Your Evil Investments
Start by getting statements about what’s in your portfolio so you can search for each product one at a time. Find out what these corporations and foundations do. You can start by looking for environmental, social and governance (ESG) reports that describe the company’s impact in these areas. Some organizations make them available online. There are also several databases to look up information about ESG and how companies and funds stack up on specific values:
- As You Sow (online tools to find fossil fuel , gun and prison free funds to name but a few)
- ESG assessment tools such as MSCI , Sustainalytics , other Morningstar resources
- Ethical Consumer Ratings
- Sustainable and Responsible Investment Forum (US SIF) list of sustainable investment mutual funds and exchange-traded funds (ETFs)
You can also find out if corporations donate to causes you don’t agree with, or politicians who don’t agree with you. OpenSecrets allows you to search campaign contributions by organization or view funds received by specific candidates. There are also certain sectors that are more vulnerable to human rights violations , such as forced labor, human trafficking and exploitation.
Note that a Google search for a company or a review of news articles is likely to raise only the most obvious red flags, says Nicholas Creel, assistant professor of accounting and business law at Georgia College and State University. This means you probably won’t find all the questionable shit in public records.
Research management and shareholder action
Avoiding evil corporations is not the only impact investing strategy. You can also find out if the companies in your portfolio are taking steps (or not) to improve behavior.
Elena Botella, director of the Omidyar Network in Washington, DC, recommends examining shareholder decisions about the company’s business practices, policy contributions, and social impact. Find key voices that include shareholders and asset managers (if you own mutual or index funds) through organizations such as Majority Action , Share Action , and the Interfaith Center for Corporate Responsibility .
Beware of “Green Wash”
Of course, any company or foundation can present itself in a way that sounds great but is actually misleading . While some corporations publish public ESG reports, they and their mission statements are ultimately part of their marketing.
“The problem with this strategy comes down to the fact that you’re making sure the company isn’t misrepresenting or hiding important information,” Creel says.
So you can’t always find all the dirty parts on your own. If you are already working with a consultant, ask any questions you have about the ethics of your portfolio. Many advisors are now familiar with investing in ESG, so you can probably find someone on Google if you don’t already have one, or affiliates like US SIF.
Remember your goals
While impact investing sounds noble, you also need to keep your returns in mind. In general, impact investing works in much the same way as alternatives, but aims to balance your money goals with your values.
“Remember that your financial goals are your top priority,” says Scott Sadler, founder of Atlanta-based Boardwalk Capital Management . “Create an investment plan and then implement the various parts of it using sustainable vehicles.”