Should Your Holdings Reflect Your Values?


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With it being Thanksgiving in the U.S. today, I thought of writing an article to make us all think about our actions. I’m going tell you upfront: I’m divided about this topic.

As an investor, I sometimes forget the overall impact of my actions. After all, the very first thing I’m interested in is making money. The reason why I invest money is obviously to use this vehicle to get richer, to reach my financial independence, and to retire wealthy and happy.

However, investing is a lot more than that. Our actions have an influence in life whether it be the way we consume, the way we raise our children, or the way we act in public or at home. When you invest, you also have an impact on the rest of the world. You might want to tell me that you and I won’t influence the market or the way business is done. You might as well tell me it doesn’t matter if you keep your car running for 20 minutes during winter time because you like your seat warm and cozy. After all, what’s one car running for nothing when there are millions of trucks rolling for 10 hours a day on our roads? I tend to disagree.  I think we all have a role to play and that our actions have consequences, as little as they are.

Investing & Values

Over the past decade, various investing firms tried to find a way to market socially responsible investments. They packaged funds and ETFs with what they call “socially responsible companies” or “ethical investments”. Back in 2010, I even wrote a whole series about socially responsible investing. During this series, I’ve discovered something that distracted me from investing in those kind of packaged solutions.

The problem about ethics is that everybody has its own definition. We will all agree to the “obvious”. A company is making T-shirts in Pakistan and using children as slave labors in their factories? This is definitely a no-go. However, what happen with an oil company? What if the company follows protocols and respects both regulations and their employees? I know, now we have people that will nod and others that will cringe.

This becomes a dilemma because ethics doesn’t mean legal. There are tons of things you can do that are not ethical but are legal. Then, the line that was as obvious as the Grand Canyon becomes thinner and starts to blur. Depending on your background and values, one company may sound ethical for you while another doesn’t.

Another good example would be what happened in the banking industry. In the U.S., we have Wells Fargo (WFC) with sales malpractice. In Canada, TD got caught opening accounts clients didn’t need. Since I worked in the banking industry for a while, I can tell you that all banks have their “little skeleton” in their closets. I am not saying they are all doing or encouraging illegal sales practice. Far from it. But would it be possible that during tough times, they tend to be more salesy or find legal ways to offer products that are not 100% aligned with your interest? Will you stop investing in those juicy dividend payers based on this premise? Or will you wait until the bank is found guilty by a judge? Tough question.

What about your portfolio, Mike?

I believe in investing according to my values. For this reason, I’ve never been tempted by the tobacco industry. However, I have a few holdings that don’t exactly fit what I believe in. For example, I’m not pro-war or I don’t smile when I hear that my government is sending troops somewhere. Mind you, when Canada sends military support to another country, it is often to help, not to conquer. But isn’t that always what we tell ourselves when we go to war? That it is for the greater good? Did you know that to have a war, all you need is two parties thinking the same: they are doing it for the greater good?

Nonetheless, I invested in Lockheed Martin (LMT) a few years ago and I definitely like the company’s growth potential. But while I cash my dividend cheques, the world is not becoming a better place with F35s over our heads.

I also own shares of Andrew Peller (ADW.A.TO), a wine maker. So it’s okay for me to own wine companies, but not cigarette makers… Do you see how the line isn’t that obvious anymore? The difference is that I enjoy my glass of wine but I wouldn’t smoke. When they’re adults, I won’t mind if my children drink wine (moderately off course), but this would be another story if they smoke. Speaking of which, what do you think of Marijuana stocks? Will it become an ethic investment once it’s legal? Just some food for thought…

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