Investments: Good or Profit?

In Life of Pi, a character states that "...the Greater Good and the Greater Profit are not compatible aims...". Bill Gates has seemingly found a compromise by achieving greater profit for his company and working toward greater good with his personal foundation. The recent issues regarding the foundation's investment choices, however, call into question this compromise.

An article in the Financial Times last week went so far as to say that the Bill and Melinda Gates Foundation "snubbed" the whole movement of socially responsible investing in their philosophical statement posted on their website.

Bill Gates, the world’s richest man, on Friday delivered a snub to the ethical investment movement by saying his foundation should concentrate on grant giving, rather than judging the social impact of businesses in which it invests.

In a statement on its website, the Bill & Melinda Gates Foundation, the world’s largest philanthropic body with $35bn in assets, ruled out screening companies in which it invested based on factors such as their environmental record or lending policies.

I believe the FT article goes a bit far in its interpretation of the statement, but it does raise a major question: Can ethical investing lead to good returns, or does it intrinsically lead to lower returns than investing without consideration of ethical factors? Can the greater good and the greater profit coexist?

This is a question Pete and I have addressed several times. He owns stock in Mobil. Should we at some point get married, I would then own stock in Mobil. This is a question for me. The first part of the question is whether Mobil is even actually an ethically questionable investment. It may very well not be for me, and I would need to do a great deal of more research before determining that for myself. For the sake of argument, however, let's assume that this stock is bad. When it then becomes shared stock, do I ask Pete to sell and invest in something that makes me feel all warm and fuzzy? This stock put him through college. This stock might just sustain him (or us) in retirement. Do we give up that return to be better people? Do we have to give up a return at all? Investment experts are all over the place on this issue. The Financial Times quotes two with very different opinions:

The official [of the Gates Foundation] said: “We focus our energies on the investments we can make through our programmatic work, because that is how we can have a direct and dramatic impact that will improve people’s lives.”

Penny Shepherd, chief executive of the UK Social Investment Forum, said: “This is a rather out-dated perspective. The evidence is that you can invest responsibly without damaging your financial returns.”

However, Danny Truell, chief investment officer at the Wellcome Trust, the UK’s largest medical charity with a £14bn endowment, endorsed the Gates’ approach, arguing that focusing on ethical investment would sharply limit returns.

And even if ethical investments do limit returns, shouldn't we do it anyway? I'm not sure how I feel about the average joe's investments, but Bill Gates is THE leading examble of charitable giving in our time. I feel very strongly that Gates, as this role model to the rest of the world, SHOULD be making socially responsible investments. I think people in his position have to make a compromise. Perhaps the returns are somewhat lower, but is that really going to hurt the charities? In my January 8th post, I quoted an LA Times article that stated that Gate's giving in the Niger Delta was less than half of his investments in companies that contribute to the pollution and other problems that affect the people in the same region. So how do we solve this dilemma?

This time around, it seems we're not getting the answer from Gates.