Ethics
Should morals matter in the stock market?
Also this time I would like to tell for all who do not know me (yet) again briefly who I am. For all those who already know, I am still looking forward to your feedback! For the rest: I am 15 years old, so I can not yet trade independently on the stock market. Why do I then worry about such questions? My father has a deposit (no, it's not deposited here yet) for me, which I get on my 18th birthday.
In the meantime, I am allowed to make my own decisions within a certain framework.
So, if you wanted to get to know me better, you can find a longer introduction in my profile. And of course I would be happy about your feedback and suggestions! Only so I collect experience and can improve my contributions in the future!
Introduction
Recently I was shown an advertisement for a green ETF on Getquin. It would only invest in ecological and sustainable companies. There was also a corresponding seal, but I'll get to that in a moment. Under the contribution was an interesting comment.
It would not matter in which values one would invest, in the end it depends on the yield.
Opinions differed as to whether his children could be proud of such a portfolio and whether there were no moral values.
But is ethics at the stock exchange helpful, perhaps also necessary, and how exactly with it money is earned?
That is what this article is about.
Why is ethics not equal bad?
When I invest in a company, I automatically invest in its future.
Explained with a simple example.
If I invest in an oil company and intend to hold my position for several decades, I assume that oil will play an even greater role in the coming years than it does now.
It probably won't. We all know the problem with climate change, that we have to become more ecological in the long run is out of question. Nevertheless, many people still invest in $Shell or $Total. Why?
Companies know that they have to adapt to the times. The same is true for the climate issue, even though a lot of money is still spent on lobbying to prevent stricter climate protection laws. Nevertheless, almost all major oil companies have plans to become "greener" in the long term. Shell wants to have zero CO2 emissions by 2050.
Let's get back to the original question. People are thinking more and more ethically. The range of vegan and organic products in supermarkets is growing. More and more people are switching to electric vehicles. In short, people are thinking and acting more and more according to their morals. Even when it comes to purchasing decisions. Companies have no choice but to follow suit. If they don't, sales suffer and so does the entire company.
In summary, if you are considering whether a company will still be stable in the future, you should ask yourself whether people will still be willing to operate their oil-fired heating systems in 10 years' time (to take up the example from a moment ago) or to continue to drive so many cars.
Why is a lot of money made with morals on the stock market?
The term "greenwashing" will mean something to most people here. I would like to explain it nevertheless for all others briefly.
Greenwashing is the attempt to make a product that is actually not very ecological suddenly seem less so. Big oil companies like to greenwash with CO2 certificates, an industry which is well known for its lies.
(can make in addition also gladly again a contribution).
In the supermarket this is done with seals issued by the same company that sells the product. This is due to the fact that many terms may simply be used by corporations without following guidelines.
We have a similar problem with supposedly "green" or "sustainable" ETFs. Don't get me wrong, certainly not all investments have this problem, but a Tagesschau article published five months ago shows that you should take a closer look. For all those who want to know more about the topic, I have linked the article below. For all others, here is the short version.
A reporter was asked to talk to banks such as Sparkasse, HypoVereinsbank and Commerzbank. Subsequently, research was carried out. Out came, ALL ETFs have at least one major defense contractor in their portfolio. At HypoVereinsbank, they recommended an ETF which $MTUAY (-1,1%) , an engine manufacturer also for the Eurofighter, in the portfolio.
Oil and gas companies were also represented in many of the supposedly green investments. TotalEngines appears in several "sustainable" equity funds.
The fundamental problem, however, is the ESG criterion that measures the sustainability of an ETF (more of an experiment so far, unfortunately). A fundamentally good thing, if the ESG is not measured differently by each responsible agency. What is considered sustainable and what is not, they decide themselves. And what else doesn't one do for the order of a large bank...?
Also a problem, the term sustainability is not bound to any regulation, we remember the supermarket, the same debacle.
How could such problems be solved?
There are many proposals, unfortunately little is implemented. A simple suggestion, more transparency from the banks. After all, who would invest in an "ecological" ETF that holds arms corporations?
Another idea is to protect terms such as "green", "environmentally friendly", etc. and to link their use to specifications. This is already done in the supermarket with the term "organic".
Last but not least, a uniform system for ESG would lead to a better and, above all, more trustworthy issuance of certificates.
Conclusion
Investing money ethically can be not only good but also necessary to achieve good returns in the long run. However, morals alone should not prevail over everything else, because that is not what the stock market is for. Sustainable funds could be a solution, but they would have to be better regulated by law. Especially concerning the use of terms like "green" or "ecological".
Last but not least, everyone has a different idea of morality. To answer the initial question whether his children could be proud of such a portfolio, I think so.
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Tagesschau article:
https://www.tagesschau.de/investigativ/swr/vollbild-etf-geldanlage-nachhaltigkeit-101.html
Sources:
https://www.ecoreporter.de/artikel/studie-sieht-greenwashing-im-großen-stil-bei-fonds-und-etfs/
https://www.tagesschau.de/investigativ/swr/vollbild-etf-geldanlage-nachhaltigkeit-101.html
