Do you think the killing of animals for their fur reprehensible, yet find the taste of whale irresistible? Would you like to stop tobacco companies ruining our health, yet see nothing wrong with enjoying a bit of pornography?

Deciding which environmental/social/governance strategy to invest in may require a deal of philosophical rumination; van Eyk’s June 2008 review of Australian ESG strategies revealed that there are many points of contention among the portfolios and the ratings agencies concerning what constitutes a morally responsible investment.

Australian Ethical Investments, for example, refuses to invest in any of the four major banks. It believes the banks harm local communities, following the disruption caused by a number a branch closures in regional areas some years ago.

But it is the only fund to take issue with this. Alcohol, gambling, and tobacco companies are typically avoided, but managers are divided on whether to exclude those in the business of nuclear energy, fur, or pornography. Some include uranium as long as it used for energy and not weapons. Others avoid it all together.

Moreover, some managers will still invest in a company that is considered “low impact”, meaning the objectionable practice accounts for less than 5 per cent of revenue. Managers also differ on how quickly they will sell out of a company following a negative event.

After the Santos drilling accident in Indonesia, some managers liquidated positions immediately, while others held on for months until prices were more agreeable. Finding a portfolio that is a match for your morals may require more than just a compromise on returns.

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