How can I invest ethically? I don’t want my money going to evil corporations

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welcome to Take stock, a space where we can take a deep breath and try to figure out what the COVID-19 economy really means for our finances. Every month, personal finance expert Paco de Leon will answer your most difficult and emotionally charged questions about money. The past two years have forced many of us to re-prioritize our financial priorities, and there’s no clear roadmap for getting through the pandemic yet — but Taking Stock is here to help us figure it out together.

This month, we’re talking about how to invest ethically so your hard-earned money goes to companies you believe in.

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Dear Paco,

I am 28 years old, I work for an association and I hope to start invest about $50 to $100 a month outside of my Individual Retirement Account (IRA) when I do it to the max this year. I also have a 403(b) by work. My investment options outside of retirement accounts are now limited, as I recently moved and am adjusting to a rent payment. I also learned recently that sustainable investing is an option – who knew?

The thought of my not abundant money going to social purpose organizations is much more powerful to me. I feel like every day I read stories of terrible corporations doing next to nothing for the world. The people who have taught me the most about money speak from a completely capitalist angle, and I think there are better options out there, like B-Corps, climate change organizations, or Black-owned businesses. How can I invest my money sustainably? I don’t want it going to evil corporations!

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Dear Ethics,

I appreciate that you want to find ways to be less shitty to the Earth and to your fellow human beings. I’d be happy to walk you through a whole bunch of ways to reduce your carbon footprint while still going to the banks and investing your money. However, I want to point out some gigantic and obvious obstacles.

As individuals, we have free will and we can have an impact through our financial choices, but that impact may be limited if we compare it to that of huge financial institutions, like hedge funds or banks. Another thing to recognize is that the mechanisms of creating wealth through investment are inherently exploitative and extractive. This is less of a judgment than a statement so that we can understand the fundamentals of this system that we continually opt into.

When we invest in companies by index funds, mutual funds or exchange-traded funds, what we are buying is property. Even if our stake is small, we become shareholders of the companies in which we invest. Instead of workers getting all the value they create, some of that value instead goes to shareholders, who benefit from it. Which, let me be clear, is the whole point of a business. It does what it’s supposed to do.

While we can make a difference by navigating these waters in the most ethical way possible, as I will discuss below, it is also true that making individual choices places the burden of social issues on the individual.

bank better

Banks are in the business of lending money using their customers’ deposits and lending it to businesses and individuals. Very big banks are often the ones that lend to big corporations because they are big banks so they have a lot to lend. Doing business with smaller, community-focused banks is one way to use your money to invest in communities.

Consider doing business with a local credit union, minority-owned bank, or community bank. Some other less diabolical banking options worth noting are Suction and Merged. These banks take a holistic approach to banking. For example, Aspiration savings and debit card purchases will never be used to fund the oil or coal industries and customers have the opportunity to help neutralize their carbon footprint by planting trees as they go. as they spend money.

Impact Investing

Another way to be less mean with your money is to go through impact investing. Impact investing can be done by investing in socially responsible funds, fossil-free funds or through what is known as ESG investing. ESG investing is investing that considers environmental, social and governance factors to assess and judge the overall impact of an investment as well as its financial return (the money you earn from your investments). Many investment banks allow investors access to SRI (socially responsible investment) and ESG funds. Improvement, Avant-gardeand the above Suction are a few. All these platforms are accessible to individuals. You don’t need a stockbroker (does one still exist?) to access these investments. Yippee, progress!

It is important to note that there was reports that some funds marketed as socially responsible or fossil-freein fact, invest in what they say they are not doing.

I know what you’re thinking Gasp! How can an industry that profits from opacity and rarely acts in the best interest of the consumer without the influence of the law, outright lie? Where does the world go when you can’t trust marketing? So if you want to be completely certain that what you are investing in is what you were told you were investing in, the onus is on you, the individual.

Until legislation makes it harder or more expensive for businesses to lie, you should do some extra research yourself. Fossil-free funds is a search engine that can help you find funds that avoid fossil fuels. You can also see the rankings of various companies that you may have already invested in.

I also called Amanda Holden aka The Dumpster Doggyan investment expert, educatorand friend to ask him what he thinks about the subject.

While we both agree that it’s hard to punish big companies by refraining from buying and holding their stocks at the individual level, Holden told me “it’s totally fine to pick the fund ESG index which simply filters out the worst of the worst – usually oil companies and arms manufacturers – especially if it matters to you.If you don’t want to profit from these industries, you don’t have to!

However, she also went on to say, “When you use an ESG index fund that filters out the baddest companies – you’re not investing in oil companies and arms manufacturers – but you’re still investing in a lot of companies that people would consider unethical, like Amazon and JP Morgan Chase, the latter of which happens to be the largest lender to fossil fuel companies worldwide. [And] here we could get into what is a better use of our time depending on the potential impact: demanding better alternatives, pushing for regulation and sweeping legislative changes, like closing tax loopholes, taking money out of the political lobby. »

Think globally, act locally

We can also deploy our money to support communities and organizations whose values ​​and actions align with ours. It’s a way to reinforce and amplify our values ​​in the real world. But, remember children, we cannot consume our way out of inequality and climate change.

Support small enterprises on large companies as often as possible. Find small, local stores in your neighborhood and ask friends, family, and co-workers for recommendations of businesses they’ve frequented in the past. Shop employee-owned businesses, collectives and B-Body to support workers and organizations taking a more holistic, people- and planet-centric approach to business.

Do what’s right for you

There is no one path that everyone will take as we each navigate and negotiate how to invest ethically and use. Many of these decisions are deeply personal. Living in such a globalized, financialized, unequal and interconnected world makes it difficult for us to be perfectly ethical all the time. Each of us will find what works for us while learning to sit with some of our actions that we cannot perfectly reconcile. We live in gray areas of a gray world; it is the beauty and the friction of human existence.

Your favorite financial friend,
Paco
(she they)

PS None of the answers above were investment advice.

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