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Showing posts with label ethics. Show all posts
Showing posts with label ethics. Show all posts

Wednesday, March 5, 2008

Tobacco, Super Funds and Ethical Investing

Today, this story has been given quite a bit of publicity in the news:

Most say no to tobacco in super funds


By Tamara McLean | March 05, 2008

TWO out of three Australians don't want their superannuation funds to invest in tobacco, even if it returns good profits, a study has found.

But contrary to their wishes, the Cancer Council NSW research also shows nearly one third of funds do hold tobacco shares, while most of the rest failed to respond to questions on the topic.

And only two per cent of funds surveyed had formal policies excluding tobacco industry investments, the study found.

"What is significant about this research is that these superannuation funds have barely considered the issue, treating investment in tobacco companies just like any of their other shareholdings, despite the fact their members are strongly opposed," said lead researcher Professor Raoul Walsh.

The large-scale survey found more than three-quarters of the 3500 Australians randomly questioned thought superannuation fund investments in the tobacco industry were unethical.

Of the respondents who actually had superannuation investments almost two-thirds, or 63 per cent, preferred their funds did not invest in the tobacco industry, even if the investment was profitable.

But in the study, published in the journal Health Promotion International, nearly one-third of surveyed super funds confirmed they held tobacco shares.

A further 58 per cent failed to comment or know the answer, said Prof Walsh, from the Centre for Health Research and Psycho-oncology, a collaboration of the Cancer Council NSW and the University of Newcastle.

"Essentially this study brings to light the fact that almost everyone who holds retirement savings in super funds are likely to be inadvertent and unwilling investors in tobacco companies," he said.

Cancer Council director of health strategies, Anita Tang, said while impressive gains have been made in tobacco prevention, there was still a long way to go when it came to the policies and practices of Australian superannuation funds.

"Any financial gain to the tobacco industry, and therefore investors, is inextricably linked to increased death and ill-health in our community," Ms Tang said.

"We'd like to see Australian superannuation funds and their investors think more carefully about shareholdings in the tobacco industry, as a positive exercise of social responsibility and to realign their practices with the views of their members."

Smoking causes about one-fifth of all cancer deaths in Australia, as well as a range of other diseases.

http://www.theaustralian.news.com.au/story/0,25197,23322155-36418,00.html

What is most interesting, and heartening, is that the majority of people are willing to forego earning money (in dividends and capital appreciation) from profits generated by the tobacco industry. It also says a lot for the fund managers who are so out of touch with client's needs, as to completely ignore the issue.

All in all, it is a goal kicked for fund managers who are willing to take on board these ethical concerns. And if anyone does not know where the money in their super funds is invested, and is concerned about it, perhaps they should look at the small percentage of those with a policy of excluding tobacco holdings.

Posted by Glen at 2:00 PM 0 comments  

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Thursday, February 28, 2008

Some Ethical Ramblings

Recently I have been thinking a lot about the shares I own, how they relate to my own personal ethics in investing and trading, and it has led me to ask some serious questions about myself and about the importance of different aspects that I weigh up.

Obviously, my methods of investing at least, are dominated by the factors that I deem important in the real world. Social issues, environmental concerns and cultural sensitivities are just of a few of the things that come into my mind when I make a decision about what shares to trade, or what to invest in.

The problem is that you can’t always have the best of everything. You have to at some point accept that some things, if you take this approach, will become more important in your mind than others. Of course from there, you inevitably question why those things are more important than others, and how you came to those conclusions. Sometimes I feel as if the conclusions are in part the result of carelessness or absent mindedness at the time. So it is critical in my mind to be able to continually evaluate these factors, and how they relate to what you are doing, and the stocks which you own at the time.

It also raises a few other questions. For instance, is it ethical to trade purely for money, shares that you would not dare to own as an investment? I trade Dow futures, and S&P futures, both of which contain underlying shares of companies I would not touch with a barge pole. But the fact that I don’t hold overnight, only trade these intraday, closing all my positions within the day, means I don’t add any value to markets and stocks I would not otherwise want to do, and makes my decision easy. I have no problems with doing this.

With shares, it is a little bit different. For starters, you have to weigh up what I talked about above, i.e. ascribing certain importance to the different factors. And evaluating them in the first place is difficult in itself. What we all do when we make decisions, especially with shares, and any other time when we have multiple choices, is make a decision based on the framework known as decision theory. Or so it goes. Which will be the topic of another discussion. I don’t trade shares intra-day which would solve these problems.

So what are the factors that I deem most important? Well, corporate governance, social and cultural acknowledgement and assistance, along with worker satisfaction/ safety are what I deem to be most important. Not necessarily for those specific reasons alone, as I will also discuss later. Company environmental impacts, and inherent specific industry related environmental impacts are the next most important for me. Obviously, if you have a company that is in a notoriously damaging industry, but is doing all it can to reduce its environmental impacts, it should be given a better approval than one that isn’t. However, there are some areas I will not touch regardless. Sand mining, uranium mining and coal (except under exceptional circumstances) are the three big areas.

So where does this leave me?

Given the different aspects I weigh up, I have several trading/ investing categories that I place each share into, given their ranking in my mind. They are:

  1. Trade long only, and be more than comfortable with receiving dividends.
  2. Trade long and short, and be prepared to accept dividends, without targeting them.
  3. Trade long and short, and avoid receiving dividends.
  4. Trade short only.

I guess from this you can deduce that I generally don’t have a problem with trading long and short, purely for money, in companies I don’t necessarily ethically agree with, so long as I avoid earning money from the “unethical” business practices themselves. It also means that the shares I rank highly aren’t being reduced in value, from my minuscule actions by trading short, and vice-versa. In doing this, and having each category, although I probably forego my maximum profit potential, it makes me feel more comfortable, consistent with my personal beliefs and ensures that I don’t bastardise my values. So long as I can justify my decisions, and act on them within this framework, I am satisfied.

Getting this all down on paper so to speak, has helped immensely.

Thankyou.

Posted by Glen at 12:49 PM 8 comments  

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Sunday, February 24, 2008

Comic Relief For The Sub Prime Fiasco

If anything, this sub-prime fiasco demonstrates the clear need for ethical behaviour by all market participants. Some of the stories are obviously fairly shocking. Unemployed people given million dollar loans and the like. There is no need to continue to go on about that.

But what is needed, is an awareness by people, in that if there is clearly unethical behaviour being perpetrated, then a thought process about who stands to gain most from this? Most likely the person who is carrying out that behaviour has the most to gain, and if you are on the other end of it, you must ask yourself, "why are you there, in that position, at all?"

But it is often said that common sense is not all that common.

Anyway, these are two videos that I found which gave me a bit of a laugh. The first is very educational and clear for those who don't know much about how all this came about. The second is Britney Spears with lyrics that seem to align the disaster.

John Fortune & John Bird:



Such a good representative of the intelligence of the lending practices themselves:



Enjoy! I hope it gives you at least a smile. I know it did for me.

Posted by Glen at 11:18 PM 0 comments  

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