The dictionary has several definitions of the word ethics; one of the most common definitions is that ethics refers to a system of moral principles. The other definition is that ethics refers to the rules of conduct that apply to a particular group of people.
And the broader definition of ethics is a branch of philosophy that deals with the values related to human conduct about right or wrong.
Ethics is a highly subjective topic and can raise difficult questions for regulatory agencies and investors because the meaning of ethicality somewhat differs among various groups.
The Ethical Puzzle
Even though the meaning of ethicality of investing could be stated simply as investing in those companies that act ethically, investors seeking to achieve the ethicality of investment should establish a set of criteria that can be applied anywhere. The set criteria should tell which investment practices are ethical and which are unethical.
For instance, those of the Christian faith may use the bible as a guide because the book provides rules for people to evaluate the world and the things around them. However, spiritual guides may not provide a crystal clear text to guide investors when making practical investment decisions.
The Ethical Issues
The meaning of ethicality to various ethical-minded investors differs, but there are particular areas where ethics play a common role. Some of the noticeable areas where investors evaluate according to their ethical standpoints are;
One of the key areas in which investors and governments play a role in demonstrating the meaning of ethicality is preserving the environment. Here, investors create high standards and technological projects to reduce the destruction of nature, wildlife, air pollution, rivers, lakes, etc.
Socially Conscious Investing
Investors can also avoid unethical investments by investing in socially conscious investment vehicles. For instance, socially conscious mutual funds evaluate companies based on a particular ethical criterion. Many of these funds are provided by religious denominations and tend to avoid what they consider as “sin industries.”
Winning at Others Expense
Having winners and losers in a free market is inevitable; however, some ethical issues arise regarding how the company wins. Monopoly companies can indeed perform very well regarding some ethical matters. However, this total market domination prevents other healthy businesses from venturing. And this, to some extent, is considered to be unethical.
There is no absolute standard for deciding what is ethical or unethical because morality and ethics are subjective topics. Although the meaning of ethicality to various investors may differ, there are certain areas in which the same criteria are applied to determine what is ethical and unethical.
Some of these areas include the areas of environmental responsibility, socially conscious investing, and winning at others’ expense. It is also important to note that a lack of quality information hinders the ability of investors to make investment decisions based on ethical considerations. For instance, there is a lack of accurate information regarding the efforts to cut down emissions for various industries.