Ask Colin

What is your view on ethical investing?

This is not an easy question. One has to start with a definition of "ethical". I suspect there are more types of "ethical" than there are vegetarians! One can get to be concerned about the ethics of almost anything, depending upon where you start from. Tobacco and alcohol companies are obvious. So are casinos and gambling/wagering companies. Then there are polluters, with chemical, mining and paper companies at the top of the list. However, almost any company can be a polluter. For example, does Telstra pollute because they release radiation from their mobile phone business? Then there are those that exploit third world labour and that can be a very long list. Globalisation has got a bad name, so that could exclude international companies. Only 3% of executives in Australia are women according to today's AFR, so if women's rights are an ethical issue, that will exclude almost every company in the country. Maybe some of this is going a bit far, but I think you can see that one woman's "ethical" is different to another's.

If you want to get into this, I suggest researching it on the Internet. There has been a fair bit written about it in the media like AFR and Shares/Personal Investor and newspapers generally. There are even some funds that specialise in ethical investing - your broker or financial planner should be able to point you towards them.

You can also research company web sites and annual reports. Get the addresses from the ASX web site. You can even go to annual general meetings and ask questions. In the areas of pollution and third world labour exploitation, the facts can be hard to come by. However, I suspect there is quite a lot available on the Internet if you search it - there are a lot of pro-active people out there in the wide world watching and reporting.

What you do have to be careful of is that the people pushing ethical investing are not in fact exploiting you - your fears, prejudices, compassion for your fellow human beings, or whatever. I suspect that "ethical" sells fairly well and is another niche product for which premium fees can be extracted. In particular there may be a trade off between return and your principles. Make sure you are aware of the cost.

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