Every choice of how we use money and time, besides having its own direct ethical effect, good or bad, also may have less direct ethical effects. Each choice might be at the exclusion of other choices. Each effect results in others, each with their own ethical effects. Your choices may influence other people, each having their own ethical effects. That influence may be though your words, or by setting an example for others to learn and follow.
Positive effects can include changing something for the better, helping where it is needed, avoiding bad consequences, and promoting good ones. Through our choices we can try to have those positive effects, directly through our own actions, and through the help of other people.
There are five types of uses of money and time: (1) Invest for future gain. (2) Obtain a positive ethical impact to people, animals, or the environment. (3) Purchase goods and services. (4) Save for future use or prevent wasting it. And, (5) Convert from money to time or vice versa.
Many uses of money involve more than one of those types, and some can be all five. For example, a bank account is an investment if it yields interest, an ethical choice depending on how the money is used, a purchase of bank services, and a way to save money and time. Another example is a purchase that saves you time and that you resell later at a profit. It probably has many ethical consequences. Your purchase, besides supporting the companies that bring you the product, also supports the ethical impacts those companies have. And the product itself has an ethical impact due to the resources needed for its manufacture, transportation, storage, use, and disposal.
Many uses of time are more than one of those types, and some can be all five. For example, employment is a large investment in time for money, an investment if you gain experience to obtain raises in salary, an ethical cause if the company contributes to society, and a conversion of time into money. Other examples of time investment are learning and taking care of yourself through rest, exercise, and eating.
Although some uses of money and time are only for the positive ethical impact, most other uses can also have positive ethical results. In other words, with the right choices, a positive ethical impact can combine with all the other types of uses. Some uses of time or money may only be for their ethical effect, such as spending time for a worthy cause through education (write, protest, speak), volunteering, and thinking, or donating money to a worthy cause.
Money and time can be used to influence the behavior of companies. With your money you can purchase or avoid their products, services, and stocks. With your time, you can advocate, recommend, and criticize a company to change the opinions of others about it. Choosing where to be employed also affects companies. The object is to reward good businesses and hope the bad ones get the message. With the power of influence, we can work together to affect the behavior of companies to improve their social performance.
But, it's difficult to determine which companies deserve support and which ones don't. We can try to judge behavior by how much good and bad result. But, what is good and what is bad, and to what extent, is very subjective. What makes this even more complicated, is that companies have many behaviors, each resulting in different combinations and degrees of good and bad.
First you need to give relative weights of importance to each of the many categories of ethical issues. Decide the importance of each category. This is difficult because there are so many ethical issues, and people's selection and relative importance of each vary greatly. For example, there is a great variation on the importance people place on animal and environmental issues relative to human issues.
Second, determine the extent that each company positively and negatively contributes to each category. Review sources of information on company behavior and products.
Third, determine how much bad can you tolerate, and how much good you desire. The good or bad behavior might be the company's major focus or purpose, or it might be very limited in scope. For examples, you might choose to support only companies that (from most to least limited in producing options): (1) Do good and don't do bad. (2) Do good, but tolerate some bad. (3) Don't do bad, but don't expect good either. Or (4) don't do bad exceeding your limits. If you consider all issues in every situation, you won't be left with many choices.
Ethical investing (EI), also called socially responsible investing (SRI), is making investment decisions not only to try to obtain the usual financial gains, but also for positive, or lack of negative, ethical results for people or other animals. The same types of investments are available as for ordinary investing, but with that additional ethical criterion. There are four places to investment money: (1) publicly traded stock, (2) loans and bonds, (3) yourself, and (4) real estate.
Owning shares in publicly traded company stock can influence company policy through shareholder activism and through stock demand. Shareholder activism is when shareholders may speak at board meetings and participate in some votes, such as for new board members. Companies want their stock held by others because they benefit. Increased stock demand increases stock price, and stocks are widely held among company executives. A large portion of the income of most high-level executives is their company's stock. Plus, employees often are offered stock purchase plans.
You provide your money for ethical loans directly or through companies and organizations that loan money to causes that benefit society, to people who are economically disadvantaged, or to businesses that provide benefits to those causes or people. That includes a small percent of the following: banks, credit unions, financing companies, venture capitalists, mortgage companies, community development organizations, and nonprofit loan funds.
An investment in yourself can yield positive ethical results, such as through learning how to better contribute to society.
An example of ethical investing in real estate is making housing available to economically disadvantaged people.
Some investments, such as bank accounts and mutual funds, may involve more than one of the categories above. Determine where the money is invested, and learn the criteria used to decide which companies your money supports. None exists that screens for all issues. See also a list of mutual funds organized by screening method.
Taxes on capital gains of investments can be avoided by donating the investment directly to a nonprofit organization.
This page was written and is copyright © 2001 by David Cohen. Before using information in this article, know that my background is neither in investing nor finances. This article is one of five web pages on ethical investing.
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