Andersen: Sanitizing your poisoned portfolio
If your money is dirty, what does that say about you?
Students and professors at Harvard have been asking that question of their school’s investment policy in the management of its massive endowment. An editorial in The Crimson, Harvard’s school paper, assigns moral responsibility to investment decisions.
What an idea! Imagine if millions of American investors scrutinized their portfolios and assumed moral responsibility for their capital, weighing their conscience against investment decisions.
With Harvard and hundreds of other colleges and universities making moral decisions on investments, isn’t it time for individual investors who value moral virtue to likewise purge their portfolios of poisonous assets?
Many investors haven’t considered this because they draw a hard line between morality and money. Many deem it foolhardy to align investments with conscience, preferring willful ignorance of the impacts of their accumulated wealth.
Living lives of material pleasure without a qualm for the long-term implications of one’s capital is a tried-and-true formula for feckless investors who defer to finance professionals, the majority of whom judge investments strictly by the bottom line.
While conscientious consumers may never buy an egregious item at the store, as investors they may compound socially damaging trends. Such cognitive dissonance is acceptable in a society where morality is a bother if it makes unvirtuous the material riches to which we have been taught to pay obeisance.
The target at Harvard is fossil-fuel investments with companies whose byproduct is carbon emissions. The Crimson reports that the university’s recent reduction in campus emissions of about 85,000 metric tons of carbon dioxide per year pales when compared with Harvard’s investments, which are estimated to generate a 100 million-ton carbon footprint.
“In terms of carbon emissions,” states The Crimson, “the university’s investments are about a thousand times more important than its campus emissions.” It’s like driving a Prius while capitalizing on dirty coal.
Climate change is an obvious culprit, but there are innumerable other taints that color investments in chemical industries, plastic manufacturers, agribusiness, gun makers, pharmaceuticals, fast-food chains, cigarette companies — many of them wrapped in mutual funds.
The Atlantic Monthly reported that socially conscious investments are not typically as lucrative as amoral investments: “If your goal is to generate the highest possible investment returns, the choice would be easy: tobacco giant Philip Morris — the single best-performing stock in the S&P index for the 46 years through 2003.”
How could anyone with a fiber of decency sacrifice the long-term health and security of others for their own short-term gains? Because it’s done all the time, thanks to a huge moral blind spot in finance. Perhaps things are changing.
The New York Times recently reported that divestment of dirty assets began in American universities around 2011 and “has expanded to the business world and institutional world, and includes large pension funds, insurers, financial institutions and religious organizations. It has also spread around the world, with 688 institutions and nearly 60,000 individuals in 76 countries divesting themselves of shares in at least some kinds of oil, gas and coal companies.”
“Currently more than 600 institutions around the globe with more than $5 trillion in assets have made policies to move their investments away from fossil fuels,” reports The Crimson. “It is fully within Harvard’s power to do this, too.”
And so it is for individual investors whose portfolios and IRA nest eggs may compromise their personal moral stance, if only they made the effort to find out.
“Some of our most loathsome, socially unredeeming industries have produced great investment returns,” the Atlantic reports. Here lies the moral quandary.
The Crimson concludes that “if we accept the importance of reducing our emissions, then we must also accept responsibility for our investments.” Acting long-term rather than quarterly on climate can head off deeper issues like floods of climate refugees, water and food scarcities, outbreaks of pestilences, super storms, etc. All lead to human suffering and global unrest.
Levering investment capital to influence social change may have more clout than the vote. Taken far enough, morally based investments could reshape the values of the military/industrial complex.
Such a remedy for social problems isn’t easy, but then, making difficult moral choices never is.
Paul Andersen’s column appears on Mondays. He may be reached at email@example.com.
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