The social side of investing

Most investors calculate the possible returns and financial position of companies, but forget to consider that the firms they support will have an impact on the world they live in, writes DANIEL BUENAS

Published June 4, 2007

EVER wonder if superheroes have financial advisers? It was a question - a rather random one - that popped up in my mind recently, after watching Spider-Man 3.

After mulling over the notion for a while, another more interesting question emerged: Would Peter Parker (aka Spider-Man) invest in LuthorCorp or in Stark Enterprises?

For the comic book uninitiated, LuthorCorp is the company started by Lex Luthor, evil genius extraordinaire and Superman's arch nemesis. Stark Enterprises is the company formed by Anthony Stark, otherwise known in the comic book world as Iron Man.

I'm going out on a limb here, but I figured that investors in LuthorCorp would actually reap higher returns (given Luthor's unethical - but probably highly profitable - ventures) than investors in Stark Enterprises.

So given this scenario, would our cash-strapped young Peter Parker choose to invest in a higher-yielding company run by an supervillain or a lower-yielding firm run by a superhero? Would it even bother Peter Parker?

Well, before this article delves too far into the investing habits of superheroes - interesting though the topic may be - let's examine the issue that the aforementioned scenario really deals with: ethical investing, otherwise known as socially responsible investing.

Following ideological principles

Socially responsible investing is a term used to describe people and groups who only buy the shares of companies that operate within a certain set of social or ideological principles, such as being environmentally or animal friendly.

The term doesn't seem to have a strict definition, but refers to investors who consciously choose to invest in companies that fit their social beliefs, and who consciously avoid investing in those that go against those beliefs. It is also used to sometimes describe investors who are guided by religious principles.

Would an investor buy shares of a gaming company if he or she has strong beliefs against gambling? Or would an animal lover buy the shares of a company that had been known to conduct animal testing?

These questions are what socially responsible investing is all about, and it is surprising that there are many investors who hold deep-seated beliefs about life and yet, are willing to invest their money in companies that act contrary to those beliefs.

Most investors spend much of their time calculating the possible returns and financial position of companies, but forget to look at the social side of things. Some investors also inadvertently invest contrary to their beliefs through mutual funds that have a stake in those companies.

In Singapore, there are only a handful of investments that fall under this category. However, in the US and the UK, there are more choices available to investors.

For example, there are many asset management firms in the US that focus on environmental sustainability investing.

There are also mutual funds in the US that adhere to biblical principles. These funds do not invest in companies that are involved (directly or through subsidiaries) in vices - such as tobacco firms, alcoholic drinks producers or gaming companies.

More investment choices

For those who subscribe to Islamic principles, recent moves to turn Singapore into an Islamic banking hub should mean more investment choices for those so inclined in the near future.

In Islamic banking, banking or financial activities must be consistent with Islamic law - syariah - principles.

Syariah law prohibits riba (the collection and payment of interest), gambling (which may encompass trading in financial risk) and investing in businesses that are considered prohibited, or haram, such as those that manufacture or sell alcohol or pork.

While many people still see investing as just a way to generate more money, there is also a bigger social picture to consider.

Like it or not, the money we invest, and the companies that we support will have an impact on the way our world is shaped.

And if money is power, then we can paraphrase a famous quote from Ben Parker - Peter Parker's uncle in the first Spider-Man movie - to read: 'With great money, comes great responsibility'.

So while LuthorCorp could probably help Spidey turn a better profit, it's more likely that Spidey will stick to his superhero mores and invest his hard-earned money in Stark Enterprises. Uncle Ben would be proud.