OpinionNov 21 2014

Cognitive dissonance undermines our ethical values

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This indifference shouldn’t come as a surprise, but given the attention devoted to socially responsible investment, it might. Ethical investing enjoys a disproportionate amount of column inches in both the press and product marketing and even gets its own dedicated week, giving it the same importance in the calendar as British sausages, and seven times the significance of disability awareness, which only gets one day.

In reality, ethical investment has a small, but devoted market. But even within that, I would question the model’s value. It seems to be largely undermined by most investors’ oversimplified interpretation of what ethics are.

Of course different companies have different ethical standards, just as much as different people do. Some will draw the line at investing in arms, while others are happy to, but won’t sanction companies with dubious environmental credentials.

The strictest will not permit investment in supermarkets, which – by selling wine, cigarettes, scratchcards and so-called lads’ mags – can be argued to be profiting from alcohol, tobacco, gambling and pornography.

But how many of the people investing in ethical funds even look into this inconsistency? I’m sure the overwhelming majority of those that do take an interest probably don’t look beyond the ‘ethical’ label, which is applied as if it is a constant definition, set in stone.

It feels like most are just looking to tick a box in order to make themselves feel better and alleviate the guilt they associate with making money. They can scratch this itch by sticking some or all of their cash into a simplistic vision of an ideal captured by the loose term ‘ethical’, They are not interested in actually finding out where their money has gone, seemingly content to delude themselves that it is entirely tied up in fairtrade kaftan looms in the Himalayan foothills.

Even if an investor has done their homework and ensured the criteria matches up to their own principles, if they invest through any mainstream provider they will effectively be giving money to an organisation that uses other funds to invest in guns, blood diamonds and human trafficking.

I exaggerate, but the point remains. Ethical investors – genuine ethical investors and not just those who claim to be until push comes to shove – need to engage with the process. Those who are more interested in just making money would do well to admit that to themselves.

Investors need to start caring or stop pretending to or eventually the charade will be seen through and the entire concept will go the way of Mrs T.