Correlates of Ethical Investing and the Issue of Sustainability

Abstract

This paper was concerned with individual difference correlates of preferences for three issues associated with ethical investing. Five hundred adults completed a long, 60-item, questionnaire concerning personal details, including demographic (sex, age, education) and ideological (political and religious beliefs), as well as a three-part measure of their investment attitudes: what investments to avoid, what general issues to consider when investing and what people issues to consider when investing. The results indicated that they most wanted to avoid investments concerning weapons, animal testing and fossil fuels. The most important issues when investing were thought to be pollution, deforestation and carbon footprint, which all have at heart the sustainability philosophy. With regards to workers, they noted child labour, wages and worker rights as the most important issues. Correlations showed relatively few demographic correlates, but there were a number of religious belief and political attitude correlates of investment preferences. The strongest relationship was between political beliefs and anything associated with global warming. Implications and limitations are acknowledged, in particular with respect to having rank-order data and not knowing important information about the respondents.

1. Introduction

All financial investors are faced with an array of choices, decisions and investment opportunities and may choose a particularly well-established approach or philosophy. These include the following: value investing (seeking stocks that an investor believes are currently under-priced by the market and whose prices the investor expects will eventually rise significantly), fundamentals investing (trying to identify companies with strong earnings prospects, because their business fundamentals are so robust), growth investing (investors buy shares of companies whose products or services hold the potential to generate strong earnings growth and higher stock prices in the future), technical investing (this relies on the examination of past market data to uncover hallmark patterns in trading activity on which to base buy and sell decisions) and contrarian investing (this involves going against the crowd, and involves buying and selling in contrast to the prevailing sentiment).

This study is on ethical investing, which is concerned with how people apply a number of ethical, as well as financial criteria, when choosing to invest money in the expectation of a return [1,2,3]. This idea is that various ethical codes and theories are used to evaluate options. It has received an increasing amount of attention in the academic and popular literature, particularly its effectiveness in yielding good returns [4,5,6,7]. More recently there has been a focus on the socio-political ideological aspects of investing particularly in sustainable projects [8]. Sceptics call ethical investing ‘virtue signalling’. Is it a cynical strategy to get a bit of good public relations (PR) or a wise move that can be justified to all company stakeholders? This approach begs the questions of the meaning of ‘ethical’. To many, this may be relatively simple and straightforward, yet any student of ethics will tell you that there are several different and competing ethical codes.

This study is unique in the sense that it examines what investments to avoid on ethical grounds; what environmental/sustainability issues to consider when investing; and thirdly, issues concerning people/labour when investing. We were particularly interested in the issue of investing in sustainability, which could be seen as part of the ethical investing approach [9,10]. Indeed, there are even scientometric studies on this growing literature [11]. As Joshipura et al. [12] note:

“The key issues encompass investor motivations and investment performance of sustainable investments compared to conventional investments, challenges, and policy enablers that aid the development of sustainable financing and sustainability outcomes” (p. 4469).

There is now a growing literature on sustainable investing and on how it can affect company policies, which in turn have meaningful and significant consequences [13].

2. Ethical Investing

The Nobel Prize-winning economist Milton Friedman proposed a radical alternative to the usual idea of ethical investing. He argued that businesses should concentrate on legally producing goods and services efficiently. He also advocated for open and free competition. All the socio-ethical problems should be left to concerned individuals and government agencies and should be no concern of investors whose main aim is to maximise profitable returns in their investments. This view represents an extreme and clear statement on ethical investing, but is, however, currently somewhat ‘out-of-date’ and rejected by a number of professional and personal investors. Those interested in sustainable investing seriously challenge this view, particularly when considering fossil fuel and other investments. They argue that it is important to evaluate the environmental and human consequences of all investments.

Thirty years ago, ethical investing was associated with excluding various options—not investing in products from particular countries or that were seen as a problem for health: things considered unethical, immoral or simply wrong. However, it has recently become more inclusive where investors seek out companies, products or people that represent their own values. There are thus now select-in, as well as select-out, criteria. Thus, self-proclaimed ethical investors search for possible investment opportunities that tick several boxes: environmental concerns, labour relations and/or product application, as well as good returns. This is a fine and difficult balance where compromises are nearly always required.

Now, we have the concept of sustainable investing, which is concerned with the environmental and social impact of an organisation with its overall good governance [14]. Some are interested in diversity in the workforce, the company’s selection procedures as well as its management practices [15]. In this sense, there are a number of identifiable dimensions to ethical investing. Marti et al. [16] have described how shareholders with a sustainable philosophy can create three types of impact: direct impact on companies, indirect impact via other shareholders, as well as an indirect impact via the institutional context.

This study is concerned with ethical or socially responsible investing, which is clearly linked to sustainability investing. This research may be informed by the moral reasoning literature, which studies how people think about right and wrong and how they acquire and apply moral rules to various aspects of their lives.

This study focuses on investing in companies whose practices align with an investor’s values as they pertain to the company’s impact on society and the environment, while yet yielding a good return for the investor. It may, therefore, be a trade-off between ethics and returns in the sense that investments that systematically seem to yield best returns fail on a number of ethical criteria

The idea of this type of investing has been around a long time [17,18,19,20,21,22]. Researchers from variety of disciplines have expressed an interest in this topic for different reasons [23,24,25,26,27,28,29,30,31,32,33,34,35,36,37,38,39,40,41]. The most recent literature appears to have focused on sustainability investing [13].

Inevitably, there has been a particular interest by those concerned with the general topic of business ethics [35,42,43,44,45,46,47,48,49]. There are, of course questions about what precisely is business ethics, and how it relates to ethics in general. Thus, it is possible to compare different ethical frameworks like Utilitarianism and Egalitarianism, which would lead to different ethical decisions.

3. This Study

This study was concerned with lay attitudes and beliefs about some of the more commonly discussed issues in ethical investing. We were interested in which issues/areas people cared most about and some demographic (sex, age, education) and ideological (political and religious beliefs) correlates. We crudely divided these into three sections. The first were issues to avoid or anti-investing, as there appears to be as many ‘push’ as ‘pull’ features. We obtained a list of ten products (e.g., alcohol, tobacco) and processes (e.g., animal testing, genetic engineering) that appear frequently in advertisements and blogs that deal with ethical investing.

The second issue was concerned with environmental and sustainability issues that have recently dominated discussions in this area. Similarly, we derived a list of eight of these issues that are most commonly discussed and are now almost daily news.

Third, we focused on people issues (e.g., wages and conditions), which are often considered when it comes to ethical decision-making. Here, the issue is how the company treats its suppliers, workers and customers.

In our pilot work, we found that a high number of participants indicated that all of the items we listed were of importance to them. As a consequence, we chose to ask them to rank order the preference in each section. We are aware of the statistical and psychological differences and limitations when choosing ranking over rating but decided to use this approach.

We believed that four of our individual difference factors would be related to ethical decision-making: education, religious and political beliefs. We assumed that better educated people would be better informed and thus less likely to support discredited or less well-substantiated claims. We also hypothesised that more politically conservative and more religious people would be less concerned with environmental and people issues and ethics than more liberal and less religious people. We also assumed that the simple Global Warming question would mean that it indicated much greater sensitivity to environmental issues.

4. Method

Participants

A total of 504 participants completed the questionnaire: 254 were men and 249 were women. They ranged from 20 to 73 years old, with a mean age of 38.42 years (SD = 8.36). About seventy percent were graduates, while 33.9% were single and 44.2% were married. They also rated themselves on two scales: How religious are you? (Not At All = 1 to Very = 8) (M = 3.73, SD = 3.07) and, How would you describe your political beliefs? (Very Left Wing = 1 to Very Right Wing = 8) (M = 5.87, SD = 1.79). They rated the extent to which they agree they were “an Optimist” from 1 = Not at All to 9 = Very Much so with a mean of 6.89 (SD = 2.07). They similarly rated how good they were at maths with a mean of 5.94 (SD = 1.85). They indicated whether they had ever invested in the stock market and 48.6% said Yes and 51.4% No. Asked if they had an investment portfolio, 41.8% said Yes, and 58.5% No. They were asked, “How seriously do you take Global Warming” on a response scale from 1 = Not at all to 9 = Very much so, with a mean of 7.01 (SD = 1.80).

They were also asked the Milton Freedman question: Please read this sentence and indicate the extent to which you agree with it: There is one and only one social responsibility of business—to use its resources and engage in activities designed to increase profits as long as it engages in open and free competition without deception or fraud. Strongly agree 10 9 8 7 6 5 4 3 2 1 Strongly disagree. (The results were M = 7.46, SD = 1.85).

They were also asked two further questions: Do you have an “investment portfolio”? (Yes: 41.5%, No: 58.5%) and, Have you ever personally bought any shares/stocks/bonds? (Yes: 48.4%, No: 51.6%).

Ethical Investing: Below are the instructions that participants received for the different parts of the survey:

“Ethical investing is defined as not profiting from activities considered harmful to society and the environment. It usually involves investing in organisations, companies, and projects that are committed to operating ways that are sustainable for the future. Many of us make decisions about these activities. For some people they are very important and affect where they shop, how they vote, and where they invest. Others are less concerned and are more interested in price/value for money. Please state first how important this issue is to you. Very Important 10 9 8 7 6 5 4 3 2 1 Not at all Important.

This short survey has three sections that all require you to rank order the issues that most concern you. First, read the list then decide which issue is most important to you and which you most disapprove of in the sense that you would never invest in a company or product that had anything to do with these issues. The first section was labelled General issues (see Table 1); Environmental issues (see Table 2) and the third People and Social Commitments (see Table 3)”. They were told: “Put a 1 next to that. Then read through the remaining issues and put a 2 next to the issues that you feel most important for you to avoid—and so on to 10”.

Data were collected on-line through Prolific. Participants were compensated for their time (receiving GBP 2.00). The application entry for ethical review was considered to be low risk due to the nature of the research project (i.e., anonymous, non-invasive questionnaires administered to healthy employed adults whose participation was entirely voluntarily). Usual data cleansing took place. The study was run in March 2021.

5. Results

Table 1. Results of the rank ordering of investments to avoid (1 = most to 10 = least).

General Issues	Mean	SD
Tobacco	4.70	2.46
Gambling	5.59	2.33
Alcohol	5.88	2.43
Weapons (military hardware)	3.99	2.73
Adult entertainment (pornography)	6.39	2.87
Animal testing	4.41	2.72
Thermal coal/fossil fuels (coal, oil, gas companies)	4.61	2.70
Genetic engineering	6.00	2.77
Pharmaceutical companies	6.27	3.15
Fast-fashion brands (i.e., Boohoo, PrettyLittleThing)	7.15	2.81

shows the two issues that people most disapproved of, and believed it was important to avoid, were armaments (military weapons) and pharmaceuticals (animal testing). Those issues that gave them less concern were fast fashion and pornography.

Table 2. Results of the rank ordering of issues to consider when investing (1 = most to 8 = least).

Environmental Issues	Mean	SD
Carbon footprint	4.00	1.94
Deforestation	3.50	1.67
Carbon emissions	4.34	1.99
Pollution of oceans, lakes, rivers, etc.	3.20	1.89
Animal testing/cruelty	4.58	2.34
Intensive farming	5.84	2.04
Nuclear power	5.98	2.45
Excessive waste of natural resources	4.56	2.33

shows the two issues that people most disapproved of were green issues: pollution and deforestation Those issues that gave them less concern were intensive farming and nuclear power.

Table 3. Results of the rank ordering of various people issues when investing (1 = most to 7 = least).

People and Social Commitments	Mean	SD
Wages: not paying employees a living wage	2.74	1.27
Rights: not implementing equal rights policies	3.06	1.53
Trade: not adhering to fair trade standards	4.82	1.29
Customers: not benefiting customers’ lives	5.68	1.34
Labour: child labour/modern-day slavery	2.22	1.71
Working conditions: harsh working conditions	3.45	1.49
Unions: refusing joining/forming trade unions	6.04	1.38

shows that the two factors relating to labour judged most important were child labour and poor wages, whilst the least important was judged to be being about to join a union.

6. Correlations

We then performed a serious of non-parametric correlations between select individual difference variables and the ratings shown in Table 1, Table 2 and Table 3. They were demography (sex, age, education), ideology (religious and political beliefs), general trait optimism and how seriously they take global warming, their self-rated mathematical skills, whether they invested in the stock market and bought shares and the extent to which they supported the Friedman quote. These were chosen based on the previous literature, which may indicate that they relate to ethical investment concerns. Given the scale used, a negative correlation indicates strong preferences to avoid those investments: in other words, not to invest. Further, the way the items were scored, a positive correlation with political beliefs indicates that conservatives have a high preference to avoid, while a negative correlation indicates that group has a low preference to avoid the investments. Similarly for religious beliefs, positive correlations indicate that less-religious people favour avoidance more, whereas negative correlations indicate that more religious people favour avoidance more.

Over the three tables (Table 1, Table 2 and Table 3), it seemed that some of the variables seemed little related to the ethical decisions. These included their self-rated maths ability; whether they bought stocks and shares and invested in the stock-market; and their investment portfolio, suggesting ethics was more related to socio-political attitudes and beliefs than economic criteria. Interestingly, the “Friedman question” was a significant predictor in around half the decisions as manifest in

Table 4. Correlation between the demographic factors and the General Issues ethical investment choices.

	Mean	SD	1	2	3	4	5	6	7	8	9	10	11	12
(1) Sex	1.50	0.50
(2) Age	38.42	8.36	0.02
(3) Degree	1.30	0.46	−0.09	0.17 ***
(4) Religious	3.73	3.07	0.10 *	0.03	−0.02
(5) Political	5.87	1.79	0.00	−0.05	−0.13 **	−0.21 ***
(6) Optimist	6.90	2.07	0.03	0.06	−0.12 **	0.26 ***	0.06
(7) GlobalWarm	7.00	1.81	0.03	0.05	−0.09 *	0.04	0.27 ***	0.14 **
(8) Maths	5.94	1.85	−0.17 ***	0.01	−0.15 **	0.08	0.08	0.10 *	0.14 **
(9) StockMarket	1.51	0.50	0.17 ***	−0.04	0.11 *	−0.02	0.08	−0.12 **	−0.00	−0.19 ***
(10) BuyStock			0.19 ***	−0.05	0.07	−0.04	0.06	−0.17 ***	0.01	−0.18 ***	0.83 ***
(11) InvestPortf.			0.10 *	0.03	0.11 *	−0.12 *	0.04	−0.19 ***	−0.09 *	−0.18 ***	0.64 ***	0.59 ***
(12) Friedman	7.46	1.85	−0.05	−0.06	−0.01	0.22 ***	−0.21 ***	0.13 **	−0.05	0.10 *	−0.06	−0.10 *	−0.09 *
(13) Tobacco	4.70	2.46	0.13 **	0.07	−0.00	0.04	0.05	0.03	0.10 *	−0.06	0.02	0.02	0.08	0.01
(14) Gambling	5.59	2.33	0.06	0.00	0.03	0.01	0.03	0.14 **	0.09	−0.04	−0.06	−0.07	−0.06	−0.05
(15) Alcohol	5.88	2.43	0.06	0.05	0.01	−0.05	0.13 **	0.03	0.09 *	−0.00	0.01	0.02	0.01	−0.11 *
(16) Weapons	3.99	2.73	0.03	−0.04	0.01	0.11 *	−0.16 ***	0.06	−0.01	−0.09 *	−0.07	−0.10 *	−0.07	0.22 ***
(17) AdultEntertain	6.39	2.87	−0.08	−0.13 **	0.04	−0.13 **	0.09	−0.04	0.07	0.05	−0.02	−0.01	−0.04	0.01
(18) AnimalTest	4.41	2.72	−0.08	−0.11 *	−0.03	0.09	−0.03	0.07	0.02	0.04	−0.09 *	−0.09 *	−0.07	0.10 *
(19) FossulFuel	4.61	2.70	−0.08	0.07	−0.03	0.14 **	−0.19 ***	0.00	−0.27 ***	−0.03	0.00	−0.01	0.03	0.09
(20) GeneticEngineer	6.00	2.77	−0.04	−0.05	0.03	−0.13 **	0.18 ***	−0.10 *	0.08	0.08	0.05	0.06	0.02	−0.12 **
(21) PharmCompany	6.27	3.15	0.00	0.03	−0.02	−0.09	0.08	−0.05	0.02	0.07	0.07	0.08	0.02	−0.09
(22) FastFashion	7.15	2.81	0.03	0.11 *	−0.01	.05	−0.17 ***	−0.11 *	−0.16 ***	−0.03	0.07	0.08	0.07	−0.05

* p < 0.05, ** p < 0.01, *** p < 0.001.

,

Table 5. Correlation between the demographic factors and the Environmental Issues ethical investment choices.

	Mean	SD	1	2	3	4	5	6	7	8	9	10	11	12
(1) Sex	1.50	0.50
(2) Age	38.42	8.36	0.02
(3) Degree	1.30	0.46	−0.09	0.17 ***
(4) Religious	3.73	3.07	0.10 *	0.03	−0.02
(5) Political	5.87	1.79	0.00	−0.05	−0.13 **	−0.21 ***
(6) Optimist	6.90	2.07	0.03	0.06	−0.12 **	0.26 ***	0.06
(7) GlobalWarming	7.00	1.81	0.03	0.05	−0.09 *	0.04	0.27 ***	0.14 **
(8) Maths	5.94	1.85	−0.17 ***	0.01	−0.15 **	0.08	0.08	0.10 *	0.14 **
(9) StockMarket	1.51	0.50	0.17 ***	−0.04	0.11 *	−0.02	0.08	−0.12 **	−0.00	−0.19 ***
(10) BuyStock			0.19 ***	−0.05	0.07	−0.04	0.06	−0.17 ***	0.01	−0.18 ***	0.83 ***
(11) InvestPortf			0.10 *	0.03	0.11 *	−0.12 *	0.04	−0.19 ***	−0.09 *	−0.18 ***	0.64 ***	0.59 ***
(12) Friedman	7.46	1.85	−0.05	−0.06	−0.01	0.22 ***	−0.21 ***	0.13 **	−0.05	0.10 *	−0.06	−0.10 *	−0.09 *
(13) CarbonFootprint	4.00	1.94	0.02	0.01	0.03	0.09	−0.15 ***	0.06	−0.09 *	−0.03	0.00	0.00	0.02	0.05
(14) Deforestation	3.50	1.67	0.05	−0.03	0.02	0.11 *	−0.03	0.04	−0.04	0.10 *	0.01	0.01	−0.03	0.06
(15) CarbonEmission	4.34	1.99	0.12 **	0.07	0.03	0.07	−0.17 ***	0.02	−0.18 ***	−0.11 *	0.01	−0.06	0.07	0.10 *
(16) Pollution	3.20	1.89	−0.02	0.03	−0.10 *	0.06	0.14 **	0.13 **	0.06	−0.00	0.01	−0.01	0.04	0.06
(17) AnimalTest	4.58	2.34	−0.08	−0.11 *	−0.10 *	0.07	0.09 *	0.14 **	0.16 ***	0.09	−0.07	−0.10 *	−0.12 **	0.05
(18) Farming	5.84	2.04	0.00	0.01	0.00	−0.10 *	−0.01	−0.07	0.05	−0.04	0.10 *	0.09 *	0.08	−0.13 **
(19) NuclearPower	5.98	2.45	−0.02	−0.01	0.09 *	−0.23 ***	0.10 *	−0.13 **	0.01	−0.02	−0.00	0.05	−0.03	−0.15 ***
(20) NaturalResource	4.56	2.33	−0.04	0.04	0.02	−0.00	−0.01	−0.14 **	−0.00	0.02	−0.05	0.02	0.00	−0.00

* p < 0.05, ** p < 0.01, *** p < 0.001.

and

Table 6. Correlation between the demographic factors and the People and Social Commitments ethical investment choices.

	Mean	SD	1	2	3	4	5	6	7	8	9	10	11	12
(1) Sex	1.50	0.50
(2) Age	38.42	8.36	0.02
(3) Degree	1.30	0.46	−0.09	0.17 ***
(4) Religious	3.73	3.07	0.10 *	0.03	−0.02
(5) Political	5.87	1.79	0.00	−0.05	−0.13 **	−0.21 ***
(6) Optimist	6.90	2.07	0.03	0.06	−0.12 **	0.26 ***	0.06
(7) GlobalWarming	7.00	1.81	0.03	0.05	−0.09 *	0.04	0.27 ***	0.14 **
(8) Maths	5.94	1.85	−0.17 ***	0.01	−0.15 **	0.08	0.08	0.10 *	0.14 **
(9) StockMarket	1.51	0.50	0.17 ***	−0.04	0.11 *	−0.02	0.08	−0.12 **	−0.00	−0.19 ***
(10) BuyStock			0.19 ***	−0.05	0.07	−0.04	0.06	−0.17 ***	0.01	−0.18 ***	0.83 ***
(11) InvestPortf			0.10 *	0.03	11 *	−0.12 *	0.04	−0.19 ***	−0.09 *	−0.18 ***	0.64 ***	0.59 ***
(12) Friedman	7.46	1.85	−0.05	−0.06	−0.01	0.22 ***	−0.21 ***	13 **	−0.05	0.10 *	−0.06	−0.10 *	−0.09 *
(13) Wages	2.74	1.27	0.02	0.00	−0.10 *	0.07	0.09	0.03	0.00	0.02	−0.03	−0.02	−0.03	0.08
(14) Rights	3.06	1.53	−0.10 *	0.05	0.07	−0.05	−0.04	−0.01	0.00	0.06	−0.07	−0.10 *	−0.07	−0.05
(15) Trade	4.82	1.29	0.05	0.02	0.03	−0.01	0.11 *	−0.00	0.07	−0.05	0.04	0.04	0.09 *	−0.13 **
(16) Customers	5.68	1.34	0.17 ***	0.00	0.01	−0.10 *	0.18 ***	−0.11 *	0.09	−0.06	0.05	0.12 **	0.04	−0.20 ***
(17) Labour	2.22	1.71	−0.09 *	−0.09 *	−0.09	0.05	−0.11 *	0.09 *	−0.04	0.06	−0.03	−0.04	0.00	0.11 *
(18) WorkCondition	3.45	1.49	0.00	−0.01	0.04	0.02	−0.06	0.02	0.01	−0.04	0.05	0.02	−0.03	0.08
(19) Unions	6.04	1.38	0.00	0.06	0.04	0.02	−0.10 *	−0.05	−0.12 **	−0.01	−0.00	0.01	0.01	0.07

* p < 0.05, ** p < 0.01, *** p < 0.001.

.

Table 4 shows that of the eight variables, the one that showed the most correlations was political beliefs (5/10), while for religion and support of the Friedman hypothesis there were a number of significant correlations (4/10). Some variables like participant sex, degree status, maths ability, stock-market activity and investment portfolio showed essentially fewer than chance significant effects. Interestingly, many of the significant correlations were negative (indicating ranked as more important) compared to positive correlations (which suggested they were rated as less important). Older people were more eager to avoid investments in adult entertainment and animal testing though they were less unhappy about fashion. More religious people were more strongly against adult entertainment and genetic engineering, but less concerned with weapons and fossil fuels. More politically liberal (left wing) people considered weapons, fossil fuels and fast fashion more important, and alcohol and genetic engineering less important factors in their decision-making. Inevitable concerns with Global Warming (column 7) showed that the more people were concerned with climate change, the more they were eager to avoid the fossil fuels industries and fashion, but they were less concerned with alcohol and tobacco. Those who approved of the Milton Friedman position (column 12) were more concerned to avoid gambling and genetic engineering, but less concerned with weapons. Interestingly, two investment concerns, namely those concerned with gambling and pharmaceuticals showed no significant correlations with the individual difference variables.

Table 5 shows a similar set of correlations. Again, political beliefs showed more and bigger correlations, while some factors like sex, age, stock-market activity and investment portfolio showed only one significant correlation. Less-religious people were more eager to avoid deforestation and more eager to avoid farming and nuclear power. Degree status was associated with pollution and animal testing, which they were eager to avoid. Political beliefs were associated with 5/8: more conservative people were more eager to avoid pollution, animal testing and nuclear power and less eager to avoid carbon footprints and emissions.

Nuclear power, carbon emissions and carbon testing yielded most correlates. Again, political opinions showed most significant correlations.

Table 6 shows the final correlation table with somewhat different results. Three variables, namely gender, political beliefs and self-rated optimism showed 4/8 significant correlations and the issue that evoked the most significant correlations was not benefitting customers lives. Females were more sensitive to customers and less to rights and labour. Political belief significant correlates indicated that more left wing, liberal people were more sensitive trade union and labour issues, than trading standards and customer issues than right-wing, conservative issues. The Friedman question yielded three significant correlations, which indicated that those who supported this free-market position were in favour of not investing in child labour, but less willing to not invest in issues to do with trading standards and customer rights. Working conditions, wages and rights showed few or no significant correlations.

7. Discussion

The results indicate that people avoid investments in weapons, animal testing and fossil fuels. The most important investment considerations involve pollution, deforestation and carbon footprint. Issues related to workers, such as child labour and wages, are priorities. Political beliefs emerge as the most influential variable in ethical investment decisions. Concern about climate change also significantly impacts investment preferences. Religiosity plays a role, though less prominently than political orientation. This study highlights the relationship between financial returns and ethical considerations.

This was an exploratory study of some of the issues concerned with ethical investing in a general population. ESG (environmental, social and governance) issues have long been associated with ethical investing. Ethical investing often, but not inevitably, requires that people are prepared to ‘trade-off’ profit for ethics/morals. That is, they may be prepared to invest their (or indeed others’) money to ‘do good’ as well as obtain a good return. It should, however, not be assumed that this is inevitably, or even increasingly often the case, with it being maintained that a judicious investigation of stock options means it is possible to buy shares that maximise both ethical concerns and financial returns. This is one of the major concerns of sustainability investing: whether one must ‘pay a price’ in shareholder returns for an ‘ideological commitment’ to sustainability.

This study was about preferences and was handicapped by problems of potential impression management where people’s self-reports may not always concur with their behaviours: that is, they say they would/would not invest in particular shares to gain the moral high-ground, whereas in effect they might easily do the opposite if the returns were great. This may be particularly relevant in ‘high-profile’ issues like environmental concerns and sustainability. We used a rank-order technique to reduce some problems of impression management where respondents would not differentiate between shares claiming all were equally bad.

Perhaps the results suggest the core issue is perceived realistic danger. It looks as if anything related to acute, perceivable suffering (weapons, pollution, child labour) will elicit stronger rejection than abstract, long-term risks like nuclear power, which may cause unlikely but devastating disasters; trade union bans, which we might overcome but at the price of social upheaval in the future; and fashion manipulators that indirectly might cause eating disorders. This raises the connection between the economic dynamics of ethical shortcuts and perceptual experiences of imminent threats. From a more abstract perspective, it is obvious that some of the items are related to current political entrenchments. The need to highlight one or the other will depend on the world view adopted in the camp where the respondent belongs. ‘Imminent threat’ will, to some extent, depend on the institution where you pray. There are interesting policy implications for this study, which may be relevant to both businesses and government.

In this study, we focussed on various types of correlates. We found overall fewer demographic (sex, age, education) correlates though there may be some. Older people may have more money and experience as well as other generation effects that could influence their ethical investing decisions. We did find evidence of ideological correlates, particular political beliefs that suggest that this sort of investing is clearly related to values. Despite the fact we used a very simple one-question measure, we know from previous studies that this is often sufficient to get a good indicator of a person’s more complex political ideas and behaviours [50,51].

Interestingly, the very simple Friedman conviction was related to a large number of decisions. It could be argued that this approach is a-ethical in the sense that it argues the aim of business is to maximise returns legally, though of course laws change. From this perspective ethics is a red herring, as it may have little or nothing to do with business profitability. Certainly, measuring this belief in future work may yield interesting results.

People who work in the investment business have noted the huge growth in the interest in ethical investing. It is a way of affirming values in line with personal beliefs and ideology. But, it is an area also fraught with value signalling and impression management, which makes it difficult to research. However, the dramatic increase in environmental concerns, the issue of sustainability and world-wide public demonstrations both in favour of, and against, particular companies and sectors (especially fossil fuels) has meant investing has become a very significant political issue.

8. Conclusion and Limitations

The results of this study confirm many others. The avoiding of investing in fossil fuel was high on the respondents’ lists, though behind that of armaments (military hardware), which is seen to be the least desirable of all the investment sectors. The two most relevant issues thought considered important in investing were both related to the environment, namely, environmental pollution and deforestation. The issues of most concern with respect to workers were labour practices and wages. Of all the individual difference factors we assessed, it was education, religiousness and political beliefs that were most closely associated with investment decisions.

Like all studies this had limitations. Although we had a reasonably sized populations of adults, there is much we did not know about them, such as their occupation, wealth, disposable income and investment history, financial knowledge and literacy, all which may have informed their preferences along with factors we assessed. Certainly, knowing more about the financial status of individuals would have been advantageous as this is often related to both financial literacy and stock market activity [52]. It would also have been of great interest to have some insight into the ethical beliefs of the participants, though these beliefs may be quite specific to an area of life, like medical ethics [53]. This area continues to attract passionate debates between people of all backgrounds and what is interesting is what personal factors and individual differences are most clearly related to their ethical views.

Overall, the correlations were low, which suggests that with these factors measured we were not tapping into issues related to ethical investing. Equally, it could be argued that these results reveal consensual beliefs among the general public. More importantly, we asked participants to rank order their preferences. This restricts these data to being ordinal and non-parametric with restrictions on the statistics we could use. However, we know from pilot work that unless we used rank-ordering, a large number of participants would not differentiate between the different decisions they had to make. It would be interesting to investigate the potential trade-off between an ethical stance, of say refusing to buy certain shares and large potential gains. Also, this method (i.e., rank ordering) restricted us to the use of bivariate correlations, whereas a multivariate regression analysis could have provided a deeper understanding of the interaction between variables.

There is always the problem of dissimulation and social desirability responding, which is not easy to deal with, except by the use of lie scales or measures that assess impression management.

Equally importantly, our rank-ordered data made it difficult to perform multivariate research seeking to explore which of our individual difference variables was the most consistent and powerful correlate of the decisions asked to make.