If your mission is to make socially responsible investments, know that the ethics that you follow will directly influence the decisions you make. It’s not that turning a profit becomes irrelevant, but it is not the only factor or even the top priority of ethical investors protecting humanity. Making sound investment decisions results from thinking through all the variables that influence the total impact of an investment decision.
Whether you are a seasoned investor or just starting out, personal biases are always factors to consider before finalizing your investment decisions. Everyone holds unique values that shape their beliefs and motivate their choices. As an ethical investor, your goal is to look at your opinion as objectively as possible and consider the greater good of the situation for humanity.
Once you have ruled out any motivated actions that ultimately result in investments that create more harm than good to humanity, you can look at your investment choices in a more detailed manner. From there, you’ll compare costs and benefits until you’ve chosen the best company to invest in from your portfolio. For more insight into five investment practices to remember when trying to be socially responsible for humankind, continue reading.
1. Utilize Quantification With Professional Guidance
Quantifying the benefit and degree of harm that a company’s behaviors have on society and humankind, in general, gives ethical investors insight into how to make the most thoughtful investment decisions from the perspective of social responsibility. Quantification allows investors to view their investment opportunities in a measurable way rather than through opinion or estimations.
By giving a dollar amount for each beneficial act and harmful act of a company’s decisions, as well as the causes and effects they have on humankind and the world, investors can compare, on a numerical level, the amount of good vs. harm that investing in a said company would create for humanity and the world.
This tool allows investors to make ideal decisions without needing personal opinions to influence ethical decision-making. This way, you reduce error and ensure that your investment choices are genuinely grounded by quantification. Investors inexperienced with quantification should seek out help from a firm that does have experience with quantification.
2. Look Out For Greenwashing
Some companies attempt to persuade investors and customers into believing that the company’s actions and values align with ethics that support humankind. Greenwashing is a term that refers to this manipulative tactic. Companies that utilize greenwashing approaches either understand that they are deliberately misleading people, or they may not know the extent to which their actions create consequences.
In either case, the costs outweigh the benefits to humankind and, therefore, cannot indeed be ethical or “green.” As an ethical investor, you want to make money, but you also want to protect humankind and see the world become a better place. Becoming as socially responsible as possible takes time, but you can improve by looking out for greenwashing tactics.
Tip: Understanding how to weigh the pros and cons of individual companies and their impact on society and the world takes practice. For the best outcomes, work with a seasoned firm that can point you in the right direction for quantification.
3. Avoid Seeking Perfection With Humankind
All companies generate some degree of negative impact. It would be impossible to ensure that every company action did not pose some level of negative consequences for society, the environment, or the world. Knowing this, investors can have an easier time coming to terms with their decisions because they know they’re looking for the total impact on humankind rather than individual instances.
For example, let’s say a pharmaceutical company produces a drug that saves lives. However, to produce the drug, more greenhouse gases are emitted into the environment, resulting in global warming. The lifesaving drug may outweigh the number of lives lost from greenhouse gas emissions created during the production of the drug. If this is the outcome, the overall company impact on humankind is positive.
4. Use the Golden Rule
Since everyone has a different understanding of ethics and values, ethical investors must apply a common moral principle to encourage objectivity rather than individual opinion on investment decisions. It is universally accepted not to harm; in other words, to use the “golden rule” to situations as much as possible. When it comes to investing, applying this concept is a little different; in reality, no harm is doing the least harm to humankind.
By following the golden rule in this way, investors can compare the good vs. the bad that company actions have on society and decide whether investing would continue the trend of causing the least harm or, possibly, if investing would lead to significant breaches from the golden rule. The economic, governmental, and social influences also play primary roles in how ethical investors come to the decisions they make for their investment choices. Ultimately, prioritizing humanity is the focus, but these overlapping factors also influence investor decisions, especially those that prioritize environmental impact as part of social responsibility.
5. Don’t Forget To Look Into Company Culture
An overlooked concept in ethical investing is factoring in company culture. As you quantify factors, be sure to quantify company culture, including factors like how employees are treated. Investors need to recognize that how employees and affiliates are treated is part of the total impact on humankind. Forgetting to add in these critical players interferes with practical, ethical decision-making, as it overlooks people who are directly involved. Plus, you will only get accurate insights into company behavior if you include these causes and effects in the measurable values used during quantification.
Make The Best Possible Investments
Take your time working through the above five practices as you consider various investment opportunities. While using measurable values can dial down opinion, it is not 100% free of error if not all factors are considered and applied. Reach out to a seasoned firm to help quantify your potential investments so you can make the best possible investment decisions for humankind.