Want to buy the bigotry ETF?

A new ETF from Inspire in the US is trying to show that bigotry knows no bounds (hat tip to the FT):

The methodology removes from the investment universe the securities of any company that has any degree of participation in activities that do not align with biblical values, which are:

  • abortion;
  • gambling;
  • alcohol;
  • pornography;
  • the LGBT lifestyle; and
  • rights violations such as association with or doing business in terrorist sponsoring countries, countries having oppressive systems of government, and countries where there are known human rights violations related to the persecution or severe discrimination against Christians, and poor labor practices.

Jokes aside, there are no easy answers when it comes to ethical investing. Any ethical screens involve “reducing the opportunity set”. For example, there are 1,600 stocks in the MSCI world index. If you reduce that universe to 800 stocks through ethical screens and then ask a fund manager to outperform, you are asking him/her to beat the market with one arm tied behind their back.

So, what you really want is to reduce the investment universe enough to cater to your ethical concerns but no further – if you don’t mind investing in companies with a gay CEO (i.e. Apple), then you don’t want to invest in an ethical fund that can never buy Apple.

There are three main approaches:

  • Positive ethical investing: This involves finding companies that are actively contributing to causes that you feel strongly about. It might mean investing in a solar manufacturer, a biotech with a potential cure for cancer or an electric car manufacturer.
  • Negative screening: This involves excluding companies that do not meet ethical standards. It may mean not investing in any companies that are involved in tobacco, that produce carbon or that make weapons.
  • Best of breed: This involves ranking companies on a range of metrics and excluding those that don’t meet particular standards. For example, a carbon/global warming strategy may exclude companies involved in brown coal or tar sands (generally considered the most polluting) but include companies that produce natural gas as it pollutes less.

Positive Investing

Positive investing is difficult – finding stocks that are good quality and cheap is hard enough, let alone also needing to find one that’s going to help a cause that you feel strongly about. If you find a positive ethical stock that is only average quality and the stock is very expensive should you buy it anyway, expecting a poor return?

My take is that if you really like what a company is doing and you want to make an impact, then don’t invest – make a donation. I’m sure the company will find your donation more useful than you buying its shares from another investor and pushing the share price up slightly. And as an added benefit, if the stock is particularly expensive (they usually are – because investors are buying with their heart rather than their head), a donation lets you take your tax deduction up front rather than waiting for a few years for the share price to fall…

Negative Screening

Negative screening needs to be customised, which makes investing in a broad ethical fund difficult. Taking the above Inspire ETF as an example, a progressive Christian may want to avoid tobacco and gambling but feels that the anti-gay angle is a bit much, and so would have to find another fund.

A different Christian investor may not want to invest in contraceptives but feels that tobacco is an individual’s choice. A non-religious investor may have the opposite view.

So, the problem with most of the existing products out there is that they involve you shopping around to try and find a provider whose beliefs line up with your beliefs.

Best of Breed

Best of breed can be similarly problematic. If you don’t want exposure to fossil fuels, then holding a gas producer with the view that it is “the least damaging, and it is cheap and so I think I can profit from it” can seem hypocritical.

The MB Fund Way

The MB fund will use negative screens. To get around the customisation issue, we use Separately Managed Accounts and Individually Managed Accounts that are customised to your ethics if you so choose. Basically:

  1. we choose a large portfolio of stocks based on them being good quality and cheap.
  2. you choose from a pre-set list to exclude stocks from your portfolio. Some of our screens include: Nuclear, Carbon, Animal Testing, Contraceptives, Tobacco, Alcohol and Weapons.

Damien Klassen is Chief Investment Officer at the MB Fund launching in April 2017. Register your interest now (if you haven’t already):

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Comments

  1. Good to see that tobacco is not on that list. After all … it is a legal product enjoyed by about a quarter on the adult population.

    • C.M.BurnsMEMBER

      the difference between legal and illegal (substances) has absolutely zero to do with what’s in the bible

    • There are already other ethical funds that you can buy that won’t invest in tobacco. And I’ve heard of ones that won’t invest in oil companies with bad reputations.

  2. Last time I checked the supermarket in Doha, Dubai, Pakistan and KSA you could buy just about anything you can get in an American or UK supermarket. Under the last dot point, that would wipe out at least 200 global companies. Then go into automobiles and B2B organisations and you wipe out probadly more. That list just doesn’t make sense.

    • Apparently so.
      But more power to the MB ETF in parroting the FT bigot line.
      Sir Humphrey Appleby would no doubt describe as “courageous” any fund looking to raise money who would describe its prospective investors as bigots if they are not comfortable investing in porn and gambling.

    • C.M.BurnsMEMBER

      are you saying that if you don’t agree with that list you don’t have morals RT ?

    • ‘So having morals makes one a bigot?’

      No, no no, just being ‘white’ will do. #FU2racism

    • Being anti-gay lifestyle is anti-science and irrational. Homosexuality in a minority of a species population has been observed in 100’s of differing animal species, including mammals and primates, and of course humans.

      Just as irrational as saying consuming alcohol and tobacco is fine, but not marijuana.

      • Chris, Gay is not good. It simply is what it is.

        There is a continuum from Celibate to Heterosexual to Homosexual to Sex With Animals to Wherever You Want to Take It.

        Some people do not want to be exposed to Homosexuality or Sex with Animals. They have every right to have an ETF that is, in their view, morally right.

        That said, does anyone have the right to persecute others because they believe that sex with their own sex, animals or children is ok?

        We must protect those who need protecting from exploitation. That is why some people prefer to not invest in Homosexuality. They see Homosexuality as a move along the continuum towards sexual exploitation of those in psychological distress. I am sure there are other reasons also.

      • You could rationalize anything by using that logic, NT. Bestiality from homosexuality is a long bow.

      • Didn’t say homosexuality (which is not bestiality – there is a substantive difference and I didn’t even mention it) was good or otherwise. Gave an amoral view of the observable facts.
        If you dont want to invest in something that advocates or is tolerant of that view, I’m also didn’t say thats a bad thing.
        I wish people would read the words, not in between the words.
        Its not hard.

      • drsmithyMEMBER

        There is a continuum from Celibate to Heterosexual to Homosexual to Sex With Animals to Wherever You Want to Take It.

        Animals can consent ? Who are you, Dr Dolittle ?

        They see Homosexuality as a move along the continuum towards sexual exploitation of those in psychological distress.

        That is because they are bigoted fools. There is no rational or logical bridge from ‘sex for reasons other than procreation’ to child abuse, no matter how much religious zealots desperately want one.

      • Dear drsmithy:

        Humans are animals. Check your nearest encyclopedia or internet.

        Animals can consent you ask. I have no direct experience in the matter but I assume they can if humans can. That is, if a human can choose to have sex with an animal then it seems logical that an animal can choose to have sex with a human.

      • “Just as irrational as saying consuming alcohol and tobacco is fine, but not marijuana”

        Definitely irrational re MJ – -Now that I can agree with 🙂

      • drsmithyMEMBER

        Humans are animals. Check your nearest encyclopedia or internet.

        LOL. 10/10 for idiotic pedantry.

        Animals can consent you ask. I have no direct experience in the matter but I assume they can if humans can.

        By this rationale newborns can provide consent as well. Good luck with that in front of a judge.

        You are engaged in shameless homophobia by trying to manufacture a level of equivalence between legal, voluntary, consensual sex between two people who just happen to be the same gender, with illegal, involuntary, nonconsensual animal and child abuse.

    • You dumb fuck – don’t ever assume you can write me personal emails and not publish, you do not have permission to talk to me personally… if you have something to say, say it publicly. A personal email is still a legal document you moron. Take your bigot views elsewhere. Not interested – if I answer you, I will do it publicly. You banned me – remember… over your love affair of Waleed Aly, that “National Treasure” (H&H) on the basis that you didn’t even understand what the term an “apologetic” meant.

  3. I remember a self-proclaimed “vice” analyst who provided research coverage on anything on the funky side At what cost to your soul? Some people will do anything for money.

    • Mining BoganMEMBER

      “Some people will do anything for money.”

      Hence the Australia we have today.

  4. Guys if you are going to hold yourself out as being an alternative news /opinion site than you should live by those standards.

    Having what is effectively a clickbait headline for a financial services product without a small note saying it is “sponsored content” (before the jump) is the sort of bad practice you rightly criticise Fairfax and News for.

    Stop being hypocrites please.

  5. SoMPLSBoyMEMBER

    Yes, but the whisper from the other shoulder by him the one says “you need to make money’. And, it’s interesting that empire never figured out how to monopolize / list the world’s oldest profession.
    Psst. hey buddy. You looking for something?

    VIce Fund
    http://www.usamutuals.com/

  6. I would expect MB to have a chart on the website to show performance of this fund, aligning with the ideology of transparency. I’ll make up my mind then. 🙂

  7. “The MB fund will use negative screens.” Probably best to avoid letting spambot help out with any of this.

    Still, once you rule out the FIRE sector and people with invisible friends, there probably isn’t a lot left.

  8. In his novel “Complicity”, Iain Banks proposed the concept of an “unethical investment fund”.

    The logic was simple: because ethical investment was fashionable, there would be a disproportionate rush of funds into the sector, leaving unethical ivestments undervalued and providing bigger returns.

    Hard to argue with.

      • For his “straight” fiction, “The Crow Road” is probably his best, I liked “Whit” and “Espedair Street” too. “The Wasp Factory” was regarded when it came out as the cross-Atlantic sister novel to “American Psycho” and it’s a tough read. “Complicity” and the novels that followed marked a tailing off in the quality of his straight fiction.

        For his science fiction stuff, just read in the order of publication: start with “Consider Phlebas” and keep going. Banks had a lot of interesting stuff to say about political structures when writing his science fiction, so it’s worth a look from that point of view.

        The “unethical investment” concept of his did lead me to think: I wonder how much of Buffett’s investing could be argued to be “unethical?” In some ways ethical investing is a bit like ethical shopping: no matter how hard you try you usually find someone’s done something evil somewhere.

        Died a few years ago, sadly.

  9. So, will this “ethical fund” accept investments from unethical people? If they have follow certain ethics on where they invest, I think they should also follow their ethics and let only those people who pass their “ethical filter” to invest with them.

    And another question. How can a organisation have a “ethical fund” and “unethical fund” under the same umbrella? Its like having god-fearing christians and paedophiles under the same church. oops.. sorry I take my comment back.

  10. I find it strange that ‘Nuclear’ would be an ethical issue for a negative screen. I don’t care if other people do, it just seems strange.

  11. Not wanting to join in the pile on above, I’ll just leave this link to an interesting debate between Cenk Uygur (Marxist broadcaster) and Ryan Sorba (Californian conservative). Uygur loses it, figuratively and literally.
    If anyone is interested, Ryan Sorba has an interesting, albeit very disturbing video with undercover footage of gay men in club candidly sharing anecdotes (not data) of their own childhood sexual abuse and molesting children. I won’t provide the link because it’s scary and NSFW.
    #pedogate