On my morning commute the other week, standing in a packed Tube train, contemplating why I didn’t cycle in like I normally do, I stumbled upon something of surprising interest.
If you have ever taken the tube at rush hour I am sure you can agree, it’s not a place of surprising interest.
Instead, it is a place of blank expressions and uncomfortable body contact. But through all the disgruntled people on their way to work, I turned to an advert in order to alleviate my uncomfortable boredom and landed on something that caught my attention.
It was an advert, from a brokerage firm offering ethical investing funds.
This idea of ethical investing really got me thinking. Working in a financial newsletter business, which prides itself on alternative investment advice, I found it surprising that it had never been discussed.
It got me to thinking, why?
Initially, I contemplated how difficult it was to define ethical investing. I had an idea of what I thought ethical investing could be, but I understood that my definition of ethical investing is probably different to someone else’s.
One man’s ethical could be another man’s unethical. Therefore, even discussing ethics in investing would be difficult as it would mean different things to different people.
On top of this, to me investing and ethics have never been working towards the same outcome. You invest in companies to make money and what the company does is unimportant, so long as they are profitable.
Most importantly, the problem I saw in ethical investing was its potential as a profitable endeavour. If an ethical investment portfolio consistently underperforms then the idea is mute. As I have suggested, the ultimate goal whenever we invest our money is to get a return on it.
No matter where our ethics lie, investing in something that does nothing to increase our wealth is counterintuitive.
Looking back historically, opportunities to find good investments with ethical concerns are thin. We only have to look at the major industries of the 20th and beginning of the 21st century to realise that ethics were not a top priority.
For example, big oil companies have generated fortunes whilst getting involved in huge environmental disasters, wars and other “murky” endeavours.
Even the biggest wealth-generating tech stocks – created with a seemingly genuine idealism – have been caught up in scandals and questionable practices. Take Facebook and the Cambridge Analytica scandal last year, for example.
I am over-simplifying but I don’t think in the most profitable industries, where if you were invested you would have made a small fortune, there were the same concerns we have now to do with transparency and accountability, the environment, social issues, human rights, etc.
But, the more I thought about present and future industries the more a profitable ethical portfolio seemed plausible to me.
In our present situation, companies who are considered more ethically oriented, such as those focused on renewable energy, ground-breaking drug treatments or electric vehicles, have become, or have the potential to be, very profitable.
Take Tesla for example. It’s possibly one of the most famous companies in the world right now and whether you think that’s because of its zany and outspoken CEO Elon Musk or because of its products, there is no denying the foundations of the company are built on ethical ground.
If you visit the “About” section on the Tesla UK website its headline reads, “Tesla’s mission is to accelerate the world’s transition to sustainable energy”.
It is a company striving for clean, green and sustainable energy. I would argue that a decade ago investors would have scoffed at a company with this ethos.
And whatever your views on Tesla as an investment now, if you were to have invested in Tesla back in 2011 you would be sitting on over 10x what you put in.
I believe Tesla represents the tip of the iceberg, so to speak, of ethically fronted companies who are massively successful.
For other companies operating with an ethical purpose, they are very much starting off on their journey and have not realised their financial potential. These are the opportunities that investors look for.
Think about Amazon or Google when they were merely concepts. No one would suggest that they would have been a bad investment now. But back then I would guarantee there would have been sceptics.
Take small pharmaceutical companies developing new drugs.
I understand that this may be an ethically grey area for some, but to me finding cures for currently untreatable illnesses, that will improve the lives of thousands maybe millions of people, can be considered to be ethical.
For example, Viking Therapeutics is developing treatments for currently untreatable liver conditions. Off just Phase 2 testing (this is the very first stage of human testing) the stock rose an incredible 180%.
Imagine when the drug actually comes to market…
I would argue now more than ever, there are opportunities to invest in a business ethically conscientious and hit some big paydays at the same time.
What about a completely new market. One that hasn’t even come to fruition yet but with an upside potential that is enormous.
The industry I am talking about is coming for the oil industry’s head. It will truly revolutionise the energy sector and an early play could make you a hefty sum in the long term.
I’m of course talking about nuclear fusion.
I’m not going to talk about a specific nuclear fusion company because… well there isn’t one. But what I can do is open you up to its potential. And highlight how massive this could be, not only for renewable energy, but for your pocket also.
Nuclear energy may seem like a sci-fi fantasy, more at home on a movie screen than in real life. But believe me, it will be coming around much sooner than you think.
In fact, the people working on a fusion reactor at the Massachusetts Institute of Technology believe they could begin producing energy from nuclear fusion by 2025.
This will be on a very minor scale and it won’t be near commercial viability but even so, it indicates a fusion capable future, very soon.
Eoin Treacy, our very own technology expert, believes nuclear fusion could wipe out the entire energy industry as we know it. To put that in perspective, the oil and gas market alone is worth over $2 trillion.
If you were to invest in a small cap company involved in the production of fusion reactors, you would be capturing part of that $2 trillion market.
In fact, Eoin has found just that. You can read about it here.
Now I understand many things have to go right for this outcome to happen, but fusion energy has this potential. Stephen Hawking chose it as the one idea that would transform our society and you can see why.
Fusion energy would solve the problem of clean energy supplying infinite, clean and sustainable energy, but also an early play would be financially life changing.
Potentially for the first time, as an investor you have the viable opportunity to invest ethically and come out with profit…
Despite this possibility, a part of me believes it doesn’t matter to investors. As I said previously, people invest to make money. Does a company’s ethics come into our decision of whether to invest or is it simply whether it is profitable or not?
Prompted by my confrontation with the advert on the Tube, I have recently been asking myself this question.
As an idea, ethical investing has been gaining popularity. Money held in ethical funds has risen from £4.5 billion in 2008 to £16.7 billion at the end of 2018 and more than £600 million from individual investors flowed into ethical funds in only the first half of 2018.
While this is indicative of the wider financial markets, the most important opinion on this matter is you, our subscribers.
So I thought I’d throw the idea of ethical investing over to you. What are your opinions on the matter? Have you thought about the idea before or is this the first time hearing about it?
To get your opinions I’ve put together a short questionnaire on ethical investing.
It only takes a minute or two to run through it and your answers are completely anonymous. You don’t even have to enter your name or email address.
In a couple of weeks, we’ll share our findings and discuss your thoughts on ethical investing… If you have anything else that you would like to say on this topic don’t hesitate to get in touch.
All the best,
PS The credit crisis in 2008 threw governments into an ethical dilemma. Do we let banks fail or do we bail them out? They were the very cause of the problem, but who would suffer most – your everyday citizen or the banks themselves? We are all aware of how it played out.
But, this ethical conundrum didn’t just face governments in 2008. It’s been happening for decades and it’s happening right now. You wouldn’t know about it because not one mainstream media outlet seems to be talking about it.
That’s why at Southbank Investment Research we’re holding the banking crisis summit. We want our readers to be prepared for this rare market event that could put every penny to your name at risk. Click here to join and learn how to protect your wealth from the oncoming market crash.