Robert Michel |

Dr. Bob Explains Series on Financial Topics

thumb-422558_640.jpgIn graduate school I studied moral development (yes, it’s a legitimate subject) to understand how people’s sense of right and wrong is shaped and grows. Today I look at sustainable, responsible, and impact investing (SRI) through that lens. How can we extend our moral sensibility into investing? Do we want to?


The opportunities for SRI investing continue to grow. By one measure, at the end of 2017 it accounted for $12 trillion of professionally managed assets in the US, up 38% from two years prior. By another measure, sustainable funds grew 50% to number more than 350 in 2018. 

Faith-based funds are relevant (examples). They screen out companies that derive cash flow from, for example, alcohol, tobacco, gambling, adult entertainment, or arms. Islamic funds may exclude pork or lending businesses. 

Mapping Morals to Investments

 holding-hands-752878_640.jpgSRI and faith-based funds both offer a way to “map” our moral beliefs onto an investment strategy. Faith-based funds express an institutional moral code that can be the basis for our moral outlook. And so there may be direct correspondence between our moral perspectives and that of a faith-based fund. But our moral sensibility can also motivate us to support, for example, climate action through SRI funds. The starting point in any case is our own moral priorities.

Indeed, a SRI fund can be broad or focused in the range of issues it addresses. As examples, one examines a company’s behavior related to its workers, customers, products, communities, management and shareholders, jobs, and the environment. Another focuses on sustainability, especially a company’s carbon footprint.

To amplify their voices and effectiveness, the vast majority of SRI and faith-based funds votes on shareholder resolutions, proposes them, and/or engages in dialogue with company management to influence their policies. (The voting record or guidelines of a fund may be available to you and me, and certainly to its shareholders.) Some also join advocacy efforts to shape public policy. 

The continued growth and diversity of SRI and other investments increases the opportunity to invest consistently with our moral core.

Arguably one of the best ways to extend our moral selves into investing activities is by assuming responsibility for researching companies and investment opportunities that fit and are consistent with our sense of right and wrong. Normally an arduous undertaking, online platforms can offer more efficient implementation. 

But …


Mapping our moral beliefs onto investments can be rich with nuances. Recall the trolley dilemma. A runaway trolley is racing down the track, headed to kill five people who are tethered to the track. You are standing by a switch and can throw it to divert the trolley to an offshoot track. It would kill one person tethered there and save the lives of the other five. As a recent broadcast TV series asked, what would you do?

Such situations can be vexing because they require a trade-off of competing moral claims or some basis for a response. The thought processes and emotional reactions behind our response can vary widely. As a result, when we try to shoehorn our complex moral concerns into neat investment solutions, there may be compromises on which and how those concerns get translated. 

Recall also that the purpose of investing is to generate financial returns. SRI funds are establishing performance track records that rival those of non-SRI funds. Admittedly other ways to express our moral being may be just as, if not more, effective.

We are moral creatures, not in the sense that we are fully good and upright, but rather that we’re wired to consider the welfare of others and our planet. Increasingly we have ways or may want to extend that part of our selves in how we invest.



Disclosure: This commentary is furnished for the use of Glen Eagle Advisors and its clients. It does not constitute the provision of investment advice to any person. It is not prepared with respect to the specific objectives, financial situation or particular needs of any specific person. Investors reading this commentary should consult with their Glen Eagle Advisors representative regarding the appropriateness of investing in any securities or adapting any investment strategies discussed or recommended in this commentary. The Chartered Financial Analyst (CFA) designation is conferred by the CFA Institute.