Another Question About Ethical Investing

Is there any way to avoid investing in companies that do horrible things?

This week, I got an email from a Billfolder:

I’ve been trying to be more informed about spending/saving, in the long & short term. I have a Roth IRA with Fidelity, and because I don’t care to actually learn about investing, everything is in a target-date fund for when I’ll likely retire (~2055). I got notice of a shareholder vote for the fund my money is in, and a call from a proxy company they hired to GOTV, so to speak, for this fund. I started to read the voting materials, and couldn’t get past the first page without feeling outraged.

I’m really concerned about part of the voting guide, pasted here:

The Board of Trustees also carefully considered the proposal submitted by a shareholder of Fidelity Freedom Index 2030 Fund requesting that the Board institute “procedures to prevent holding investments in companies that, in management’s judgment, substantially contribute to genocide or crimes against humanity,” (Proposal 3) and recommends that you vote AGAINST the proposal. [emphasis theirs]

Am I reading this correctly, that Fidelity is suggesting that shareholders vote in a way that keeps their money invested in companies that contribute to genocide and/or crimes against humanity? My money isn’t in that particular fund, but I assume some of the money I plan to retire on in ~40 years is invested in companies that are doing truly horrible things.

What do I do? Is there a way to responsibly save for retirement without complicity in crimes against humanity? Ugh, this feels awful.

UGH THIS IS AWFUL.

First of all, I cannot provide actual investment advice because I am not a licensed investment advisor.

Second of all, I think you’re absolutely reading that correctly; a shareholder made a proposal that the Board institute procedures to prevent investments in companies that “substantially contribute to genocide or crimes against humanity” (WHAT?????!!!!!!) and the Board recommends that you vote against this proposal.

I recommend that you vote according to your heart and your conscience.

As to the second question—whether there is a way to responsibly save for retirement without being complicit in crimes against humanity—we have to turn to the full voting guide that you emailed me and study it carefully.

We know, after reading the guide, that it is unlikely that your target-date fund currently contains investments in the companies named and shamed in the proposal. These are foreign companies and the guide notes that avoiding investment in those companies might only affect a few Fidelity funds available to US consumers. So the odds are that your target-date fund doesn’t directly connect you with crimes against humanity, but those aren’t very comforting odds.

We also invest, all the time, in companies that do morally troubling things. Not necessarily “genocide” level, but definitely “sweatshop” level. This, again, is not all that comforting—nor is there necessarily another option, whether you want to save for retirement or simply wear clothes.

So you could vote with your heart and then close your eyes and cover your ears, which is what I’d argue a lot of us do, including me. I have no idea where my 403(b) investments are going. I have no idea how my Old Navy jeans were made. I have an idea of how my iPhone was created, and it involves nets designed to prevent the people who made it from committing suicide.

Is there any way to avoid investing in companies that do horrible things? Sure—but you have to decide where you’re going to draw that line. Companies that are linked to genocide and crimes against humanity should be avoided, full stop. But what about companies that are racist? Or practice wage theft? Or contribute to the destruction of the environment? It’s possible to do the work, but it’s going to be a lot of work, and it means you probably won’t be able to invest in a target-date fund.

The shareholder who decided to draw the line at genocide and crimes against humanity, and specifically named a few companies that should not be invested in, has done some of that work for you. You could choose to say “this works for me,” and vote yes on the proposal.

Then you’ll have to decide what to do if everybody else votes no.

Billfolders: what are your thoughts? Both on ethical investing in general, and this letter writer’s dilemma in particular?

Previously:

Ethical Investments for the No-Longer-Broke

Support The Billfold

The Billfold continues to exist thanks to support from our readers. Help us continue to do our work by making a monthly pledge on Patreon or a one-time-only contribution through PayPal.