Ethical Investing

Oct 04, 2000 |Todd Temple

One reader thought Temple was encouraging readers to invest with no eye toward morality. Here he sets the record straight.

In response to one of my pieces on investing, a reader, Karen, expressed her concern that I was encouraging people to invest in stocks merely to make money, with no regard to the morality of their investment choices.

I replied to her with my own views on this subject and made myself a note to deal with this topic more thoroughly in a future article. Since then, I’ve met someone who knows a lot about ethical investing. Mary Naber graduated a few years ago from Harvard, where she delivered her senior thesis on the subject. Specifically, what happens to financial returns when you apply ethical standards to your investments. After graduating, Mary has continued her research, and has written several articles on ethical investing.

Though you likely are more concerned today with how you’ll buy textbooks, not stocks and bonds, the day for investment decisions will come. When it does, her views on this important subject may come in handy.

TT: When I hear the term "ethical investing," I picture a barefooted vegetarian environmentalist hippie trying to change the world with a few dollars. Wait a minute ... I’ve just described myself.

Mary: You’re close to describing me, too — though I love my trips to In’N’Out Burger, where they insist that you wear shoes. But here’s the thing: While ethical investing — or socially responsible investing, or whatever you want to call it — has these associations to the ‘60s, the very concept originated with Christians long before then.

History is filled with evidence of this; here are just two examples: In the early 1600s, Quakers refused to profit from lucrative slave sales and weapons manufacturing. And the first "ethical mutual fund," opened in 1928, was founded by the Methodists. Indeed, the gentle hand of our Lord has been guiding this movement from the very beginning — because He cares so much about the way we care for His money.

TT:What do you mean by "stewardship"?

Mary: Many Christians have been led to believe that "stewardship" only extends as far as giving and tithing. But if all of the money belongs to God, how do we tend the 70-80-90% still left in our care? Will we invest like the world, or as a good and faithful servant, or steward, of God’s resources?

TT: Which simply means, avoiding investing in things that a person finds offensive, such as pornography, tobacco, gambling and so on?

Mary: Indeed, "avoidance" is one of the most importa nt elements to ethical investing. Sad but true, many publicly-owned U.S. corporations profit solely from the weaknesses and addictions of our neighbors — companies profiting from pornography, gambling, tobacco, as you mentioned. Other companies like Geron Corporation — which remains unapologetic in its use of fetal tissue for research — profit from the destruction of our tiniest, most defenseless neighbors.

Let's return to Jesus’ famous parable of the talents. Remember, the master praised the servants who doubled their initial investments. He condemned the servant who buried his talents in fear. What if you’re the servant, and you have to give an accounting to a Holy and Pure God?

Will you say, "Well, Master, I really did not feel adequate to care for the talents you entrusted to me. I might have buried them in my fear, but instead I schlepped the responsibility off on someone else. Now, I’ve learned that this manager invested in porn companies. With your money, Lord, we bought exposed women at a low price, which we sold to addicted men at a higher price."

One day we will all have to make an accounting. Praise God the blood of Christ has covered our sins. But don’t our hearts yearn to hear, "Well done"? Are we thoughtful about where we are placing our Lord’s money?

TT: I can understand this accountability when we know the nature of a company’s business. But so many companies are involved in all sorts of businesses — how can an investor find out what a company is really up to?

Mary: It's not so tough to do. First, check a company’s web site — you’ll usually find descriptions of their products and services. Just a quick, online investigation into the nature of a company should turn up information of possible concern.

Second, I recommend checking out the Money Channel at This Christian financial website features the Investigator, an online database of companies promoting or profiting from abortion, pornography, objectionable entertainment, tobacco, alcohol and gambling. As basic economics teaches, this information will become more readily available as Christians begin to seek it more.

TT: Where do you draw the line in deciding whether a company’s practices are "unethical"?

Mary: Some issues are clearly black and white. Is a company selling the equipment used in abortions — or truck parts? But yes. You will inevitably encounter gray areas. When faced with investing indecision, you can always challenge yourself with our most popular Christian culture phrase — What would Jesus do? If you’re still uncertain, and you’re feeling in a funk because you lack wisdom, James says to "Ask God, who gives generously without fault, and it will be given."

Ultimately, ethical investing is not about a set of laws, but a conviction of the Holy Spirit and the heart-filled response to love, serve and glorify God in all areas of our lives, including our investments. Trust Him, and He will guide you.

TT: Most people judge investments by their financial return. When a person adds this new criterion — investing only in ethical companies — doesn’t it take a toll on the bottom line?

Mary: Several years ago, some segments of popular media promoted the idea that ethical investing would hurt returns. That argument was based on the view that an ethical investor with just 7000 stocks to choose from would never do as well as the "pagan" investor with all 9000 stocks to choose from. But does this make sense to you?

An investor’s stock selection is already limited to the number of companies he or she can reasonably follow. For Peter Lynch, that’s about 2000. For me, that’s about 20. Both Peter and I can afford to be selective.

Further, over the last 20 years almost all the research and historical studies conclusively demonstrate that financial returns will not be hurt when investing ethically. In fact, returns might even be helped as you seek good companies providing social benefit to the world. These are far better long-term investments.

But finally — so what if ethical investing entailed a cost? Why be ashamed to carry a burden for Christ? He is your Ultimate Provider anyway. Not the S&P 500.

TT: This makes sense if you’re investing in individual companies, but how can you manage this if you invest in a mutual fund that has stakes in dozens or even hundreds of companies?

Mary: Unfortunately, mainstream mutual fund managers don’t care about the moral dimension to the investments. Thus, I strongly recommend investing in stocks individually.

TT: But if a person doesn’t have a lot of money to invest, it isn’t very practical or smart to buy just a few shares of several stocks, or a few more shares of one stock.

Mary: Fortunately, there are a few ethical mutual funds that are built upon Judeo-Christian values. Of course, before investing in any fund, you will want to request a free prospectus, read it, and carefully consider your decision.

But let me add one note for consideration: You would not be a wise steward to invest all of God’s money into two Christian funds that specialize only in large-cap U.S. growth stocks. God also calls us to diversify! So be sure to remember investments in small-cap, value and international stocks too.

TT: What more can we do as stewards?

Mary: In Proverbs 27, God calls us to give careful attention to our flocks and herds. We don’t ignore the sheep once we buy them. We feed them, sheer them, protect them from sickness and occasionally give them a jolly rub behind the ears.

When we use God’s money to buy shares of an ethical company that serves society, we are then stewards of His ownership shares in that company. We also have a moral obligation to vote our proxies wisely. (When you own stock in an individual company, the proxy is the annual ballot that allows you to vote on the board of directors and other issues of corporate concern.)

You can even add your own shareholder resolution to this ballot, or seek to influence corporate behavior through letter writing, prayer vigils, rallies, petitions, peaceful demonstrations or any other creative means.

TT: Sounds like a lot of work.

Mary: Anyone can open up the Annual Report, take out the proxy and check a few boxes. Most proxies come with a "postage paid by someone else" envelope. Organizing shareholder action does take a little more work, but if God stirs your spirit, who will stop you? One great organization to contact in regard to this second facet of ethical investing — shareholder action — is the Interfaith Center for Corporate Responsibility .

TT: Let me summarize: Ethical investing means avoiding owning stock in companies that do bad stuff, and taking action as a shareholder in companies that do good stuff. But we’re still just talking about stocks. How else can we "invest ethically"?

Mary: Stocks are just one form of investing. And just as there are many other ways to invest, there are many other ways to do so ethically. My favorites I call creative investments — investments that create hope and opportunity for those who don’t have these things.

For example, keep your savings and checking accounts in a community development bank or credit union that’s committed to serving the inner-city and poor. Some international stocks are wonderful creative investments, allowing you to infuse capital into developing countries and provide renewed opportunity and hope.

Another creative investment: Movies being produced by Christian filmmakers. You have a chance at making a financial return from the box office, or a priceless eternal return if someone comes to the Lord as a result of that work.

Creative investing is about placing money where it might not flow naturally, while ultimately advancing good and glorifying God in the process.

TT: Where do you learn about these kinds of investment opportunities?

Mary: It’s not so much a question of where to look, but how to look. As you integrate your faith into your investing, you begin to see the world in a whole new way: Business ventures and organizations that you would not have even thought of as investment opportunities become so in this light. You begin to see your money as God’s money, and to see places to invest it as opportunities to glorify God.

Still, you may need to do some hunting to find where God wants you to invest His money. Two web sites that provide information on creative, world-changing investment opportunities are:, Also, consider asking your pastor, prominent Christian business people, and ministries and mission organizations you support about creative investment opportunities they might know of.

TT: Any last thoughts?

Mary: God calls us to love our neighbors, not to profit at the expense of their souls. Thankfully, we can love God and our neighbors through our investments as well.

Copyright © 2000 Todd Temple. All rights reserved.


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