Material cooperation in evil
One way of thinking of my investment split is between “ethical” funds or indexes and regular ones. The ethical ones are ones that are labelled as Socially Responsible Investing (SRI) or ones that meet Environmental, Social, and Governance (ESG) criteria. Over the last few months I’ve been rethinking whether or not I should keep these investments for a few reason.
The first reason I’ll give – because it’s the most cynical reason and I want to get it out of the way, not because it’s the biggest – is that I think they might be harming my returns. That’s likely true, but from what I’ve looked at they’re not harming them by loads, at least not by more than I would say is a fair price for maybe doing good.
A deeper reason for my rethinking is one I had when I chose some of these in the first place: I’m not sure one can do good with investments like this. That is, while I know markets aren’t neutral and so we should be mindful about where we put our money, it’s not clear to me that we – or at least I – can be mindful enough such that my investments are actually (morally) good. I’m thinking here that there’s a bar to clear for investments to be good, and while choosing the Blackrock SRI portfolio or whatever might get you closer to clearing the bar, maybe you still don’t clear it. Part of me would take another step from that and then say that I shouldn’t bother. But, on this argument alone, that would be making the perfect the enemy of the good – or the less bad, at least.
A third reason for my rethinking is that some – maybe many or even most – of these SRI/ESG funds are actually worse than regular funds are in important ways, or at least the process of making them SRI/ESG is at odds with my moral compass. When I began my investment journey I think my first fund was a Church of England aligned or inspired one. And while I have my fair share of moral and other theological disagreements with the COE, I vaguely recall that being a very close match to my vision for ethical investment. When I moved to more mainstream ones, that alignment fell somewhat, but it was still more than enough, at least in the later 2010s when I set up the main ones I have now.
But now, as I look into this, I realise that the funds are at odds in new ways, and also in old ways that I didn’t notice. For eg, they consider nuclear power as counter to environmentally friendly investment, while I think nuclear is unfairly maligned and is very important for an abundant-energy, low carbon future. I’ve always thought something like that, though the strength of my belief has grown. One thing I’ve changed my mind on is on extracting oil and gas; we should reduce our reliance on them relative to other sources of energy, but I don’t think that we should eliminate them altogether, and I don’t want to avoid investing in them for environmental reasons. And then on the social side I’m sceptical of some of the diversity criteria of some of the funds.
On the flip side – stuff I’d like to exclude that don’t seem to feature in ESG criteria – are things like medical research that uses human embryos, and companies that use “slave” labour in their supply chain. But from my reading I’d have to find super niche Christian ones for the human embryo one, and the only ones I found are American, not British. And excluding investment in companies that have “slave” labour in their supply chain might mean not investing in any tech company.
And that last point brings me back to my pessimistic, arguably perfect-as-the-enemy-of-the-good perspective. The world we live in sometimes seems/feels like it’s so rotten that it’s impossible to participate in society, especially to the extent that I do, without being morally complicit in that rot. (The phrase “material cooperation in evil” comes to mind from some of my online reading of Catholic moral philosophy over the years.) And given that, what does it matter if I choose a fund labelled as SRI/ESG with a 4.1/5.0 on ESG criteria from Morningstar or MSCI or whoever when the most similar non-SRI/ESG fund has a 3.9/5.0? Does that 0.2 really make a difference? To what extent am I obligated to choose it because I’m aware of it, even if, instead of being awarded by companies whose ratings I’m sceptical about, those ratings were awarded by a KamalESG AI perfectly trained on my moral sensibilities?
