Seeking Alpha

Aria Melton's  Instablog

Aria Melton
Send Message
Aria Melton is a green entrepreneur. She reads widely on economics and environmental issues and supports animal rescue charities. Aria successfully started, operated, and later sold two green businesses. She has a keen interest in investing in companies that make a difference in the world and... More
My blog:
Aria Melton - Ethical Investing
View Aria Melton's Instablogs on:
  • The 10 Tenets of Ethical Investing

    The concept of ethical investing is not a new one. Mutual funds with socially responsible objectives have been around for decades. The purpose of this ongoing discussion is to set some basic guidelines for the investor who seeks to invest well while doing good at the same time.

    • Company must have a clear mission statement with a commitment to ethics. Business isn't just about making money; it has the power to improve the world. Firms that are at least partially dedicated to positive change are thus preferred.
    • Company must have a strong balance sheet with transparent bookkeeping.Ethical companies should have strong balance sheets. A weak balance sheet places the business, employees, shareholders, and other stakeholders at risk. Companies with strong balance sheets have no need to cover up fraud, embezzlement, or serious financial trouble.
    • Company must treat employees fairly (i.e. no sweatshops). Those with discriminatory hiring or promotion practices are ineligible. It is inherently wrong to exploit other human beings for financial gain, or to deny opportunities to equally qualified candidates. No ethical business would engage in such a practice. A good place to start is Fortune magazine's annual "100 Best Companies to Work For" list.
    • Companies with a commitment to the environment are preferred. Earth is the only planet known to be capable of sustaining human life. Therefore, if the planet becomes uninhabitable, nothing else will matter. It is not wrong to become wealthy, but we cannot eat money. These companies may encompass a wide variety of industries, including green energy and green products.
    • Ethical sourcing of raw materials, if applicable (i.e. non-conflict minerals) is preferred. Sourcing of raw materials, including but not limited to tin, tantalum, gold, tungsten, and diamonds, especially in troubled Third World countries, can be problematic.
    • Companies with a commitment to improving the world are preferred. These may be more difficult to find among the thousands of publicly traded companies. The investor will need to find these on a case-by-case basis, and determine the extent to which a given company is really in the business of improving the world.
    • Companies with a history of excess litigation are NOT preferred. No company is 100 percent perfect, and any company may be the target of lawsuits. However, an excess of litigation may indicate a lack of ethics such as mistreatment of employees, fraud, or deceiving the public. It also begs the question of what else the company is allowing.
    • Companies with known involvement in tobacco, alcohol, weapons, dangerous chemicals, oppressive regimes, and gambling are ineligible.Tobacco consumption can sicken non-consumers (i.e. secondhand smoke). While alcohol is used responsibly by a great many consumers, it is too often abused. Weapons can too easily be misused or harm innocent bystanders. Dangerous chemicals can pollute the planet and cause serious physical harm. Gambling is questionably ethical at best, and the popularity of betting on horse and greyhound races too often encourages the animals' owners to keep them racing even when they should not be. The ethical investor must choose which industries to exclude.
    • If the company makes consumer products, they must be safe enough for consumer use. There is nothing ethical about unleashing a dangerous product upon an unsuspecting public. Products need not necessarily be "idiot proof", but they must be reasonably safe when used as directed. The ethical investor should know enough about a company's products to make a reasonable judgment about the company's commitment to consumer safety.
    • Companies with philanthropic habits are preferred. Businesses that "give back" help to improve the world, regardless of the form of their generosity. Sponsorship of art museums, scholarship funds, environmental cleanup initiatives, and other acts of corporate kindness all have an impact. Many large companies will match employee contributions to a wide variety of charitable organizations. When researching a company for investment purposes, search for businesses with a commitment to charitable contributions.

    The subject of ethical investing will always be a work in progress. This list of ten tenets is set forth to invite investors to give deeper consideration to the subject. Comments are welcomed and appreciated in my effort to create a community of ethical investors.

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
    Sep 29 1:04 AM | Link | Comment!
Full index of posts »
Latest Followers

Latest Comments

Posts by Themes
Instablogs are Seeking Alpha's free blogging platform customized for finance, with instant set up and exposure to millions of readers interested in the financial markets. Publish your own instablog in minutes.