NOTICE:
This post contains information regarding financial investment.
Please see the disclaimer below.
Please see the disclaimer below.
On Thursday night, the fourth of May, Team Earthling went to Lee Coates' talk at the Port Phillip EcoCentre. Lee is the founder and director of Ethical Money in Australia, as well as being the director of Ethical Investors and Ethical Screening in the UK. In Australia, Ethical Money has one product: a supperannuation fund called Cruelty Free Super. Lee describes what he does as an holistic form of investment, because it encompasses what he calls the three pillars of responsible investment: people, planet, and animals
Ethical funds have existed since the early 1990s, but
generally they only take two of the three pillars into consideration; people and planet. Under the "people" term,
investors will look at whether possible investment options are engaged in
questionable activities such as weapons manufacture, war profiteering, human
rights violations, child labour, climate change and other so called
"sin" areas (eg. Tobacco manufacture).
Climate change is also a consideration in the
"planet" term, along with deforestation and palm oil production, pollution, and
extractive industries.
It should be pointed out here that ethical investing and
ethical funds do not necessarily actively ignore companies that do these
things, but they might own shares in a mining firm, and use their shares
to help direct the company to be more sustainable (more on that
later).
According to Lee, no ethical fund has really
looked into the third pillar of ethical investment - animals - which is where Cruelty Free
Money makes its mark. In addition to looking out for investment opportunities in
sustainable, humane companies, CFM also looks for companies that don't use or
abuse non-human animals. This means not investing in companies that use animal products in
food or clothing , not investing in animal entertainment organisations, such as SeaWorld, and not investing in organisations that encourage or make use of
vivisection.
So in Australia there is a product that lets us put our money where
our ethics are. But what is the point? Why should we
worry about where our money goes, as long as we're making a decent return? The question that we should be asking is "how do banks make
money?" Banks take investment money
- our savings - and lend it out, at interest, to individuals, businesses, and
companies.
On a side note, did you know that companies can be
legally treated as people in a limited sense? Non-living, entirely constructed
entities get legal personhood, yet living, sentient, non-human animals are
regarded as property. And we wonder what's wrong with our society.
Banks take our investment money and lend it
out with interest. As soon as we put our money in the bank, it stops being ours and becomes the bank's. It only becomes ours again once we ask for
it. When a bank lends us money, we can use it however we wish, and the bank won't question it, as long as it is paid back with the required interest.
An example: I am a small breeder of lab rats, and borrow money to invest in new, smaller cages, so I can have more rats to sell, and increase my profits. The money I borrow used to be yours, until you put it into a savings account at a bank, who then loaned it to me.
An example: I am a small breeder of lab rats, and borrow money to invest in new, smaller cages, so I can have more rats to sell, and increase my profits. The money I borrow used to be yours, until you put it into a savings account at a bank, who then loaned it to me.
Unless we can control how our money is used, it may
be used to finance things we don't want to support - it becomes the bank's
money. According to Lee, the banks have said that while it would be possible to
have a cruelty free investment option, the banks are seeing no demand for it. There is a
petition on the CFS site to get the demand up. Even if you're not a CFS customer,
you can still sign the petition, and show the banks and other financial
institutions that you do want a cruelty-free option.
That's what Lee had to say about banks in general,
but he also had a fair bit to say about long term investment. Investment is usually done with shares
in listed companies, which effectively make the holder of the shares a
part-owner of the company. The company is owned by its shareholders, and the
directors of a company act on behalf of the shareholders, and - this is
important - with the shareholders' agreement. Lee has a great blog that goes into this much better than I
can here, but basically when executives get paid a lot of money for doing not very
much, and when the directors take a company on a course of action that could be
called “evil”, they are acting on behalf of, and with the agreement of, their shareholders. Shareholders are usually large
investment firms and superannuation funds. These funds operate with money invested into them by
individuals (i.e. us), and fund managers make the assumption that their
investors don’t really care where the money comes from, as long as they’re
seeing a return on their initial investment. When MegaCorp Ltd screws over its workers, its competition,
the environment, and starts forcing child slaves to mine uranium to test on
beagles to sell to North Korea, the MegaCorp Ltd directors are acting on behalf
of the shareholders, who are in turn answerable to their investors, which is
us:
Unless you dictate the values applied to your
investments, there may be no values applied at all. This is not to say that it’s always easy or even possible to
have a say in how your money is being used, but being aware of the issues means
you can make an informed choice in the future, and help to educate others.
So who should invest responsibly? I would like to say everyone, but there are
some demographics that appear to have a greater obligation to do so than
others. We as individuals have the
right and the responsibility to put our money where our morals are, but so too do organisations:
- Charities and NPOs
- Faith groups
- Trade unions
- Ethical businesses
This last point is worth spending a bit of time
on. An example of an ethical
business would be LUSH Cosmetics.
LUSH claim to avoid all animal testing, and only a few of their products
contain animal products (usually honey, lanolin, or beeswax). However, LUSH uses REST Industry Super
as its default fund for its employees in Australia. REST Industry Super has investments in, amongst others,
Goldman Sachs (who had a large hand in causing the GFC), and Warakirri Asset
Management, which makes money in the dairy industry. I would have thought that LUSH would actively try to avoid associating themselves with these businesses.
It's not just REST, by the way. Unisuper owns huge amounts of Gunns, BHP, Unilever, and Woolworths (Woolies and Coles between them own the majority of pokie machines in Australia). Other funds invest in live export, meat packing, dairy, fur trading, organisations that conduct vivisection, large scale mining, logging, and palm oil production. Other super funds invest in similar ways.
So what can we do?
If any of the above concerns you like it concerns me, there are a few things you can do.
- Sign the Cruelty Free Super petition
- Do some research
- Find products and services that are open about their investments
- Talk to fund managers, team leaders, and accountants
- Consider moving your money from a large bank to a smaller credit union or building society, because
- Credit unions are run for and by the people who invest in them, giving every member equal consideration in voting, and
- Building societies are similarly run by members, but also only lend to its individual members, not to businesses
- Switch your super to one that matches your ethics (if possible)
- You will need to tell your employer so they can put your money in the right spot. Use this form from the ATO.
- Transfer your existing super into the new fund (rollover). Here's another ATO form, or the fund you're rolling into will provide one.
I also highly recommend checking out Cruelty Free Super, and watching Lee's talks on YouTube.
~ Luc Brien, 2012
Disclaimer
I am NOT a financial advisor. In fact, I almost failed the one Introductory Accounting subject that I had to do as part of my degree. Really, I got like 53%. This whole post is me reporting on a talk given by the very knowledgeable Lee Coates, OBE, along with a bit of my own research. Itt is meant as general personal opinion, and if you have ANY doubts, please consult a properly qualified and experienced financial advisor.
