Moral Investing

Making the headlines this past week was the atrocious scene along our border.  Being an event driven investor, I had to at least take a look at the situation to – at a minimum – determine my exposure and whether strategy adjustments are  necessary.

I’m not a prude by any stretch of the imagination but (outside of ETFs) have never invested in tobacco stocks.  I have minimal exposure to wine and spirits.  While I’m not casting aspersions on those that do, I figure there are more than enough alternatives that better fit my preferences.

I found two articles with the data I wanted.  The first, on Gizmodo, identified Hewlett Packard Enterprise (HPE), Thomson Reuters (TRI), Microsoft (MSFT), Motorola Solutions (MSI), and Palantir (pre-IPO) as significant ICE contractors.  What was problematic for me with this article was the lack of separation between contracts that were existing prior to the policy change versus contracts entered into after zero tolerance was enacted.  The second was The Nation’s piece further identifying Geo Group (GEO), CoreCivic (CXW), Comprehensive Health Services (pvt), Dynamic Service Solutions (pvt), Dynamic Educational Systems (pvt),  Southwest Key (pvt), MVM (pvt), General Dynamics (GD), and American Airlines (AAL) as parties. Topping this off is the added insight provided by LittleSis on banking ties implicating SunTrust Bank (STI), Bank of America (BAC), JPMorgan Chase (JPM), BNP Paribas (BNPQY), U.S. Bancorp (USB), Wells Fargo (WFC), Royal Bank of Canada (RY),  Banco Bilbao (BBVA), Lloyd Bank (LYG), Mizuho Bank (MFG), Bank of Tokyo-Mitsubishi (MUFG), BlackRock (BLK) and Vanguard (pvt).  I take issue with the inclusion of Blackrock and Vanguard as their “involvement” is largely passive (ETF creators/managers).

As the cries for action get louder and boycott calls increase, my thought is that not all “involvement” is complicit behavior.  Master  federal contracts (AAL, MSFT, and passive inaction should be considered individually.  Active participation (direct ICE contracts) is a wholly different ballgame.  The caution is that painting with too broad a brush may wind up being counter-productive.

In a similar vein, Paul Tudor Jones has created a new socially impactful ETF under the ticker JUST.  I personally dislike anyone making decisions on my behalf – particularly on what is defined as moral or socially responsible.  I doubt any two people are in concert 100% of the time.  Yet I was intrigued by the concept particularly when looking at the back test which showed on average:

  • Are twice as likely to pay nearly every worker a living wage.
  • Are twice as likely to pay nearly every worker a living wage.
  • Create U.S. jobs at a 20% greater rate.
  • Employ twice as many workers in the U.S.
  • Produce 45% lower greenhouse gas emissions per dollar of revenue.
  • Paid 71% less in fines for consumer sales-terms violations.
  • Give 2.3x more to charity.
  • Paid 94% less in Equal Employment Opportunity Commission Fines.
  • Have a 7% higher Return on Equity (ROE).

The index is recalibrated annually based on some 120,000 data points which means the companies and issues du jour  may not be lasting.  Perhaps he’s onto something though and perhaps I’m a slug as I only hold 27% of the index within my portfolios …

As we slide into the final week of the month and quarter, I hope the markets haven’t been too rough this month 🙂


6 thoughts on “Moral Investing

  1. Appreciate your open mind SR. I have MO, PM and DEO in my holdings. Personally, I enjoy my beverages, but have never smoked. Sometimes I avoid writing about these holdings because of the emotional/negative reaction they create. Even the nature of the big packaged food company’s products can create a stir. Who’s right/wrong and where does one draw the line is subjective and a slippery slope as you point out. Tom

    Liked by 1 person

  2. I guess my personal view was ingrained in my early religious upbringing. I am smart enough to realize I’m no Solomon therefore the determination of right or wrong belongs elsewhere. I’ve found the biggest misconception to be “I don’t invest in sin stocks as I don’t want the company to have/use my money”. If the shares are purchased outside a secondary, the company realizes no proceeds.

    Appreciate the comment (and you better get back to the gym to get fitter than your wife).


    • I find that the most challenging aspect of this moral investing concept also – “I personally dislike anyone making decisions on my behalf – particularly on what is defined as moral or socially responsible. I doubt any two people are in concert 100% of the time.”

      There is no way you’ll ever get anything closely resembling a consensus on what is ‘moral’ – we all have our different views, which is why I almost always avoid discussing this very grey area with anyone. However, I certainly don’t mind that there are people out there trying to do the ‘right’ thing in the investing world 🙂

      Liked by 1 person

      • I love the idea of civil discourse though civility has been lacking in recent history. Some of my better ideas have been reshaped by opposing views. That said, someone of Paul Tudor Jones’ stature presenting a rational argument is interesting. The metrics support the position but would be difficult to validate due the sheer number of data points in play. It is, however, an interesting alternative method to consider 🙂

        Appreciate the comment!


  3. Very interesting, the moral dilemma you have. I stopped investing in $CXW after finding out it was a private prison stock. After think awhile, I become conflicted on whether I should leave out my “morals” in my investing and just ride the waves.

    Liked by 1 person

  4. Any way this question is sliced brings up potential pitfalls running the gamut from investor activism to consumer boycotts. Obviously you had concerns – but where do you draw the line? Prisoner versus immigrant housing (ignoring the debate on illegal as opposed to asylum seekers). Then the slippery slope can continue into suppliers (food, uniforms, healthcare, etc.).

    In essence, as long as the risks are acceptable, the investor is comfortable with the activity and the action has not been declared illegal who am I to pass judgement? At least I can still choose whether an investment meets my personal standards (or not)!

    Appreciate the comment!


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