It is my personal belief that investing with an eye towards integrity and morality leads to both a clean conscience and to better long-term economic outcomes. Therefore, I include moral screening in my security selection process. (Investors do not need to agree with my personal definition of morality in order to consider a moral screening overlay.)
As an example of how moral issues can impact an investment, consider the sub-prime mortgage debacle of 2008. Rather than creating value for humankind, this plunder business model extracted value instead of created value and resulted in disaster for investors. In the short-term, a disregard for moral issues can mean greater returns, but over the long-term, this is often not the case.
Another example is tobacco. I personally do not have a clean conscience about profiting from people’s addiction to a harmful substance. But if a clean conscience is not incentive enough, think about the probable future of an industry that kills its consumers. If it can’t find new consumers, eventually there is no profit. And, statistics show that the tobacco industry is indeed finding fewer consumers (at least in the United States).
Nearly 9 out of 10 cigarette smokers first tried smoking by age 18, and 99% first tried smoking by age 26.1,2 So the key is to look at whether or not teens are using tobacco to forecast the future of the industry. As it turns out, the number of teen smokers has been falling steadily for the past couple decades. (See the graph below.)
“The 2006 Harvard Business School Press published book by Fred Reichheld entitled The Ultimate Question looks in depth at the question, ‘What really differentiates healthy, sustainable business growth from growth that, in the end, proves unhealthy and unsustainable?’ Reichheld and his colleagues and Bain determined that value creation – not profit—is the essential distinction between healthy and unhealthy business.” [Used with permission from EventideFunds.com.]
Looking into the moral implications behind-the-scenes in a potential investment can give investors valuable understanding, and considering this additional information may potentially provide better long-term investment results.
Applying Biblical Principles and Personal Values
For Christian investors, this is an opportunity to apply the same Biblical principles and values to direct investment decisions as they do every other area of life. Using the Bible as a reference point for how to invest removes uncertainty and doubt and provides both spiritual and practical guidance to the process.
If you’d like to learn more about clean conscience investing, drop me a note. I’d be happy to share more information that I’ve learned as I have studied this niche over the past several years.
1. U.S. Department of Health and Human Services. Preventing Tobacco Use Among Youth and Young Adults: A Report of the Surgeon General(http://www.cdc.gov/tobacco/data_statistics/sgr/2012/index.htm). Atlanta: U.S. Department of Health and Human Services, Centers for Disease Control and Prevention, National Center for Chronic Disease Prevention and Health Promotion, Office on Smoking and Health, 2012 [accessed 2015 Sep 14].
2. U.S. Department of Health and Human Services. The Health Consequences of Smoking—50 Years of Progress: A Report of the Surgeon General(http://www.cdc.gov/tobacco/data_statistics/sgr/50th-anniversary/index.htm). Atlanta: U.S. Department of Health and Human Services, Centers for Disease Control and Prevention, National Center for Chronic Disease Prevention and Health Promotion, Office on Smoking and Health, 2014 [accessed 2015 Sep 14].