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Question 112: May one invest in morally tainted businesses?

May one invest in businesses that supply various good products or services but also supply some things one considers seriously immoral to use? The answer seems clear: Don’t do it. But when investing in a mutual fund holding stock in scores of companies, what responsibility does an individual investor have to try to track down all the products or services of all those companies? With multinational companies, take-overs, mergers, and so on, it is very hard to determine who makes what. Foreign firms are particularly hard to get information on. Would it be morally wrong to invest without even considering whether bad products or services are involved?

Again, if one learns that one or two companies among the many represented in a mutual fund provide bad products or services, does that mean that investing in that fund is wrong?

What about holding stock in a company that sponsors immoral television shows or funds organizations that promote unjust public policies? Occasionally I have written to companies to protest such activities, but we still hold their stock.

A few years ago, when banks were paying better interest on certificates of deposit, people like us were not in the stock market, and such questions wouldn’t have occurred to us. But as I’m near retirement, my wife and I are trying to plan for the future, when we will need an adequate income. At the same time, we would rather starve than sell our souls.


This question concerns cooperation in the wrongdoing of businesses in which one invests. People who invest directly in the stock of a particular business normally intend that it do all they are aware of its doing to make its profit, and so normally cooperate formally in any of its profit-making wrongdoing that they are aware of. People who invest in a mutual equity fund holding many different stocks can intend to profit from the presumably morally clean businesses and only accept the tainted profits that accrue. Applying the criteria for evaluating material cooperation, I judge that the questioner may invest in mutual equity funds provided (1) he judges he has no morally preferable way adequately to meet reasonably anticipated needs, (2) he makes a reasonable effort to investigate various funds and excludes any whose policies tend to select companies that profit by wrongdoing, (3) he resists the temptation to cooperate formally in wrongdoing he knows about and profits from, and (4) he does what he can to persuade management to right wrongs that come to his attention. Holding stock in companies whose wrongful activities do not contribute significantly to its profits is morally questionable but not clearly wrong.

The reply could be along the following lines:

Before thinking about the morality of particular investments, one should consider several prior questions.

First, is it appropriate to invest this money? I do not mean to ask whether you should spend the money on your own and your dependents’ present needs—I assume these are being met adequately—but whether you should use it to help others. Even understanding the question in this way, though, some people with management expertise and a great deal of money might well reply: Yes, I should invest the money, for in that way I hope to provide greater benefits for the poor in the long run, and meanwhile to provide jobs for people who need them, a good product or service for people who can use it, and so on. But assuming you are not in that position, the question for you becomes more specific: Should I invest this money so as to provide for my future needs and those of my dependents or should I donate it to help other people who are in need?

Even most Christians share the individualistic notion that, having earned money or come by it in some other legitimate way, people may keep it for themselves or do with it as they please. The authentically Christian and more reasonable view is that possessing wealth entails the responsibility to see that it is used fairly to meet human needs, and that others’ urgent present needs often should take priority over investment of any sort (see LCL, 780–82, 789–92, 800–806, 811–14). To judge whether investing is justifiable, one must apply the Golden Rule, not only imagining one’s own position if one’s available money is not invested but putting oneself in the place of those whose needs will go unmet if the money is invested, and asking: If I were in such need, would I find acceptable such investment by people with prospective needs no more certainly foreseen and no greater than mine?

If one’s conscientious conclusion is that one should invest, one next should ask what kind or kinds of investment will adequately meet the future needs that justify investing. People very often fail to do this, instead taking for granted the desirability of obtaining a high rate of return. However, the higher an investment’s rate of return, the higher the risk it generally involves, and accepting unnecessary risk is wrong insofar as it is incompatible with fulfilling the responsibility that justifies investing. So, high rates of return should not be sought for their own sake; need, not greed, should dictate investment decisions. By this standard, investment in the stock market, whether directly or by way of mutual funds, might not be appropriate for someone nearing retirement, especially if the investment is to provide income for the near future. Other investment vehicles should be considered and perhaps should be preferred to investment in mutual equity funds.

Moreover, it would be preferable to invest in ways very likely to promote genuine human goods, even at the sacrifice of part of the profit otherwise available. Therefore, if you have not already done so, I think you should seek investment advice from several honest persons with expertise in various types of investment, and should consider investment opportunities that would not only avoid involvement in evil but positively benefit others. While such opportunities can be found in the public securities markets, they also exist elsewhere—for example, in privately held enterprises and real estate.

Then too, in thinking about possible moral problems involved in investing in a business, one should consider not only the moral quality of its product or service, its advertising, its impact on the natural and social environments, and other things about it affecting people outside the business but also the moral quality of the business as a community organized by relationships among owners, employees, suppliers, customers or clients, and managers (who, of course, also are owners and/or employees).317

Any business that primarily serves the interests its owners and high-level managers have in profit and high compensation—while treating others involved in the business no better than is required by laws, contracts, and market forces—is likely to do immoralities at least as grave, though seldom as obvious, as those of companies that supply products or services with no morally acceptable use. For example, a company distributes wholesome foods, advertises unobjectionably, and so on, but exploits its agricultural workers with low pay, no benefits, and wretched working conditions. Or a large retailer, morally clean in most respects, encourages suppliers to develop specialized capacities they cannot otherwise profitably use and then takes advantage of their dependence to minimize the prices it pays for what they produce. Or an insurance company, morally above reproach in most respects, deliberately trains its sales agents to deceive potential buyers about their need for insurance and cost-effective ways of meeting that need with a view to maximizing profit for the company and commissions to agents.

In searching for appropriate investments, you may find help in various publications that evaluate the ethical aspects of various businesses. Some investment advisers also present themselves as specialists in applying ethical criteria among others in recommending investments. In either case, of course, you will be able to trust advice only if you are reasonably confident that the moral criteria employed are themselves sound.

Having considered preliminary matters, I turn now to your explicit question about investing in the stock of various companies by purchasing shares in mutual equity funds.

In investing directly in the stock of a particular business, one buys a share in it; in investing in a mutual fund holding stocks in many businesses, one does not buy a share in any of those businesses.318 Of course, even if one invests directly, a very small share in a business gives one no real power to shape its policies and actions. Still, there is an important ethical difference between the two cases. One normally has no reason to invest directly in a particular company’s stock unless one expects and intends one’s money to be used to make a profit, and one normally cannot intend that without intending that the company do all that one is aware of its doing to make its profit: treat people in certain ways, encourage potential customers to choose its products or services, and so on. Thus, those who directly invest in a company normally intend it to do efficiently all they are aware of its doing to make its profits. If some of the company’s profit-enhancing policies and actions are immoral, the investor normally intends the immorality and so shares moral responsibility for it.

By contrast, just as one can buy certificates of deposit from banks that lend money to all sorts of people and businesses, some of which use the borrowed funds immorally, so one can invest in a mutual equity fund in order to profit from the presumably morally clean operations of diverse businesses represented in the fund, and not intend to gain, but only accept, the tainted profits accruing from businesses that provide bad goods and services. Still, though without sharing others’ bad intentions, by reluctantly becoming involved in certain questionable businesses, you would contribute to others’ wrongdoing. Of course, accepting the bad consequences of investing in that way also can be wrong—for example, if it is unfair to someone, or gives bad example, or is likely to be an occasion of sin for oneself, or impedes one’s witness to relevant moral truths. But sometimes doing something that contributes to others’ wrongdoing is justified, inasmuch as it is necessary to fulfill various responsibilities and its bad effects are slight.

Taking into account the preceding points and the ways in which it could be wrong for you to invest in mutual equity funds, I think it probably would not be wrong, provided certain conditions are met.

First, you may invest in this way only if: (a) you conscientiously judge that you have a need that justifies investing in some way, (b) you have made a reasonable effort to investigate various ways of meeting that need, and (c) you have concluded either that this is the only form of investment adequate to meet the need or that investing in any adequate alternative is at least as problematic as investing in certain mutual funds.

Second, as you suggest, it probably is not feasible for you to try to find out about all the products, policies, and activities of all the businesses represented in the various mutual funds among which you might choose; and even if it were feasible, the information would not solve your problem, since most funds’ holdings frequently change. However, you should use any information you have or can easily obtain to steer clear of mutual funds whose holdings seem especially heavy in seriously tainted industries or firms. Therefore, you may invest in a particular mutual fund or funds only if: (a) you have made a reasonable effort to investigate various mutual funds, and (b) you have excluded from consideration any whose policies seem especially likely to lead to the selection of the stocks of businesses that profit from wrongdoing. Certain mutual funds call themselves “socially responsible” and the like, suggesting that their managers use moral criteria in selecting stocks, but the criteria often are secularist rather than Christian. Do not trust such labels unless your study of the criteria, as stated in the fund’s prospectus, makes it clear these correspond to sound morality, including the Church’s social teaching.

Third, insofar as the profitability of one or more businesses held by a mutual fund in which you have invested depends on something immoral, you may be tempted not only reluctantly to accept that immorality but to take into account the profit from it in making investment decisions or, at least, to wish that those businesses continue making money as they do. Be on guard against those temptations and take care to resist them.

Fourth, if you learn of blatant wrongdoing by companies whose stock is held by a mutual fund in which you have invested, inform the managers of the fund that you object to investments in companies that do such things and do what you reasonably can (such as writing letters of protest) to persuade the offending company’s management to right the wrong.

You also ask about holding stock in companies that sponsor immoral television shows or promote unjust public policies. If a company’s profits depend on such activities, direct investors in its stock generally intend them. But if one reasonably judges that such activities and/or a company’s bad products and services are unnecessary for a company’s profitability and will contribute little to expected income, direct investment need not be wrong, and one could have a good reason to buy the stock despite the company’s wrongdoing. For example, some individuals and groups have invested in such companies’ stock in order to gain standing to criticize their activities and work for reform.

Finally, besides investing money to provide for your material needs, in planning for retirement you should consider carefully how you will use your remaining years and other resources. No doubt, you can rightly spend somewhat more time on rest and recreation. But many retired people waste a lot of time on passive entertainment, especially watching junk television. Avoid doing that. Ask yourself instead: How can I use my gifts to serve others? What is God’s will for me now? For in his will you will find your peace, not only in what remains to you of this life but in the endless life to come.

317. John Paul II, Centesimus annus, 35, AAS 83 (1991) 837, OR, 6 May 1991, 11, teaches that while a business must make a profit, doing so is not sufficient: “In fact, the purpose of a business firm is not simply to make a profit, but is to be found in its very existence as a community of persons who in various ways are endeavoring to satisfy their basic needs, and who form a particular group at the service of the whole of society.”

318. Investing in the stock of conglomerates or holding companies often is very similar to investing in mutual funds.