Ethical Investing

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AltaRed
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Re: Ethical Investing

Post by AltaRed »

Sadly, as we all know, the ETF world has been sadly corrupted by financial greed opportunity.
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Re: Ethical Investing

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The holders of ETFs that track many Canadian indexes (S&P/TSX Composite Index, S&P/TSX Completion Index, S&P/TSX Capped Composite Index, S&P/TSX Capped Diversified Metals & Mining Index, and S&P/TSX Global Mining Index) have an interest in NSU.

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Re: Ethical Investing

Post by parvus »

izzy wrote:
AltaRed wrote:

While I agree there are a lot of junk and boutique ETFs out there that make no sense whatsoever to even a layman investor, if that is what it takes to keep the ETF providers in the business and the availability of things like XIC, then I will bottom feed off those that pay unnecessarily.
Indeed! But going back to the name of this thread -is that ethical? :wink:
Investing is inherently non-ethical. Corporations have no responsibilities beyond maximizing shareholder profit. Why should we expect otherwise? Corporations aren't arms of government. We don't elect corporate directors to replace government. We do, however, elect our governments to do the right thing, by our lights. As CAW economist Jim Stanford once said, if you want to be ethical, buy an index fund and donate the saved MER to charity.
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Re: Ethical Investing

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Some years ago, a law professor told me the following story.

When he was a student, he and a few others discovered that they shared a taste for renaissance music. They thought it would be fun to mount a performance, using replicas. of the original instruments, clothes, trappings, etc, etc. But they had no money. Fortunately, an acquaintance put them in touch with the CEO of a large company, who happened to share their enthusiasm. As a result, the company donated a very large sum toward their little exercise. The audience was very small, true -- apparently there aren't that many enthusiasts of renaissance music -- and the appointments were much more lavish than they had originally planned. But the company was able to report in its annual report that it had indeed fulfilled its corporate social responsibility, in part by funding cultural and artistic groups.

That bothered me, and it still does. Why should a CEO decide what kind of cultural event gets funded, and by how much, according to his or her persomal tastes? Isn't this a function to be decided by the community, and ultimately by some level of government if it turns out that a subsidy is justified? Since when do we want social policy to be made by corporations instead of by communities and governments?

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Re: Ethical Investing

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izzy wrote:
AltaRed wrote:

While I agree there are a lot of junk and boutique ETFs out there that make no sense whatsoever to even a layman investor, if that is what it takes to keep the ETF providers in the business and the availability of things like XIC, then I will bottom feed off those that pay unnecessarily.
Indeed! But going back to the name of this thread -is that ethical? :wink:
Touche, izzy. Nicely played. :thumbsup:

Related: While I agree that there are a lot of active trading strategies out there that make no sense whatsoever to even a layman investor, if that is what it takes to keep the indexes fairly priced and thereby good foundations for things like XIC, then I too will bottom feed off those that pay unnecessarily.

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Re: Ethical Investing

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always_learning wrote:if that is what it takes to keep the indexes fairly priced and thereby good foundations for things like XIC, then I too will bottom feed off those that pay unnecessarily.
As Norbert pointed out, one questionable ETF from BMO generates more revenue for them than Vanguard gets from their entire range of ETFs. I'd be very surprised if Vanguard would stoop to the level of BMO. As a result Vanguard's viability may be threatened because BMO could use some of that revenue to subsidize other ETFs that do compete with Vanguard. BMO could use such tactics to ultimately drive Vanguard out of Canada, then raise the MERs. I don't see how that would be in our long term best interests.
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Re: Ethical Investing

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So would BMO be more ethical if it raised the MERs for its easy-to-replicate ETFs? Since they are so easy, they are just sheering the lambs that show up?
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Re: Ethical Investing

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I think if a person cared about ethical investing to the extent aimed for by those who would consider such funds; the only way to do it would be to thoroughly research companies and buy individual stocks. Otherwise you are counting on a manager's ethical values matching your own and despite the hype, the manager's interest is probably more linked to personal or company profit.
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Re: Ethical Investing

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Bylo Selhi wrote: I don't see how that would be in our long term best interests.
It wouldn't be in our long term interests but Vanguard is a big boy. They would find a way to counter such moves even if they have to focus most sharply on their heavyweights and/or negatively advertise against BMO with a similar product pointing out the gross (and gross) differences. As we have already seen with MER reductions in select areas, the landscape becomes competitive when a competitor takes aim and action.
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Re: Ethical Investing

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ghariton wrote:That bothered me, and it still does. Why should a CEO decide what kind of cultural event gets funded, and by how much, according to his or her persomal tastes? Isn't this a function to be decided by the community, and ultimately by some level of government if it turns out that a subsidy is justified? Since when do we want social policy to be made by corporations instead of by communities and governments?
We cannot have it both ways. IF what Parvus suggests is true, i.e. corporations have no responsibilities beyond maximizing shareholder profit, we should ban any kind of charitable and political contributions from non-persons. I think that is too harsh because the world has become addicted to corporate contributions that on whole, I believe, do some good (and some non-good through unintended consequences).

Having been in a position in my previous life to influence and direct corporate contributions from time to time, the mere fact of doing that tended to humanize what non-humans, i.e. corporations, do in many other things. IOW, there is a social community effect that extends well beyond the single specific visible thing that CEO did that you did not agree with.
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Re: Ethical Investing

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AltaRed wrote:We cannot have it both ways. IF what Parvus suggests is true, i.e. corporations have no responsibilities beyond maximizing shareholder profit, we should ban any kind of charitable and political contributions from non-persons. I think that is too harsh because the world has become addicted to corporate contributions that on whole, I believe, do some good (and some non-good through unintended consequences).
I would certainly not go that far. Cooperating with communities and sponsoring programs that help promote broad social accord, are important ways of positioning a corporation and enhancing long term profits. As such, they are as legitimate as advertising or other promotions.

But to my mind the corporation's ultimate objective in such initiatives should be long term profitability. It follows that the programs should be broadly based and truly desired by the community. Designing and executing them together with the communities is an important way of achieving this. By contrast, a CEO pursuing personal tastes, that are shared by few in the community, does little or nothing to pursue the goal of long term profitability. This makes his actions illegitimate in my view.

Of course there is a large gray area, where opinions can disagree. For example, I would prefer not to see political contributions from corporations.

But this is far from pursuing corporate social responsibility in itself. To my mind, that opens the door to all sorts of abuses and gives the leadership of corporations undemocratic powers. (I note that similar arguments can be had about union leadership using union funds for ends that go beyond their members' well-being.)

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Re: Ethical Investing

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I have seen both broad-based and personal charitable objectives being pursued. The first was the United Way which I found so unfocused and with such high overhead that I could not support it. The second was a Philippine initiative that got money into the hands of needy people. I kind of preferred the second because of its efficiency.

Hey nothing is perfect! :mrgreen:
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Re: Ethical Investing

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For the most part, I agree with George, that corporations are in it for the money. Why would they do it otherwise?

But corporate social responsibility may have other purposes, e.g., raising a constituency that will thereby thwart higher corporate income taxes (though personally, I think corporate income taxes should be abolished).

And that constituency may well be found among the charity entrepreneurs. From one perspective, charities are filling in where the state fails; from another, they are privatizing social services.

There are two ways to understand this. One is "neo-liberalism," whose critics (mostly well-paid university professors and newspaper columnists aka the anti-globalization crowd) suggest that the intent is a return to the classical or Dickensian liberalism of the 19th-century nightwatchman state, where everyone was expected to get by on their own, charity was voluntary, and the state stepped in only to avert public disorder (workhouses, debtors' prisons, transportation to America, then later to Australia).

The other, welfarism, ironically, is a product of Winston Churchill, though not necessarily for the solicitude of the poor, but for purposes of state, and as a byproduct, capital. Healthy children make good soldiers and more productive workers.

So welfarism was not intrinsically ethical, and the radical left in the 1970s (with its own ethical deficits) set about trashing the welfare state as almost entirely in the service of capital. They won the argument! Thatcher agreed!! Capital didn't need raddled mine workers, truculent auto workers, belligerent civil servants -- the whole apparatus of state capitalism propped up by welfarism. If social services only conduce to the needs of capital, let capital pay for them -- or not.

The left didn't see this coming of course, because they were caught up in a Fordistdiscourse that was now obsolete: a corporatist pact that saw mass production and the welfare state as allies.

Now the left scrambles to neo-mercantilism: bribe companies to move in and produce high-paying jobs with tariffs and capital controls and tax breaks. Unfortunately, Canadian left-wing thought is still dominated by the dinosaurs of the 1970s.

How did the left blow it: they bought the assumption that mass-production would bring with it health/education and pension benefits, as well as higher incomes -- and forget about the non-unionized service workers. As much as they criticized the corporatist alliance of state and capital, they relied on it.

In so doing, they gave the welfare state short shrift, as merely a means of preserving the dominance of capital. They never thought of Milton Friedman's negative income tax as a solution, because they were caught in the mind-trap: to survive you must have a job.

So what the left now calls "neo-liberalism" arose with their complicity. Since it lacks arugments, it has to resort to ethics. Thus the Harvard student is concerned that his T-shirt may have been sewed together by a Bangladeshi woman who only makes $5 a day (never mind that that puts her well ahead of her rice-cropping cousins) but doesn't care to think that his bedding is changed by a $8-an-hour woman, or that he was brought up by a $500-a-month nanny.

What's ethical here? And what is hypocrisy? And whitewashing?

Let corporations do what they do best: seek to extract the greatest profit. Let's not make a spurious identification between capitalism and social welfare. Under Fordism, they may have coincided, but that was fortuitous.

Let's instead look at the task of citizenship. If we want to be ethical, why do we stint on social supports? Why do we blame corporations for not giving us enough money? Why do we blame corporations for environmental devastation. After all, we all got cheaper food and cheaper energy out of it. Why not just regulate the externalities? Polluter pays: carbon taxes. Why not just have a fair tax system? Forget the tax breaks for small businesses and for miners and oil exploration companies.

I'm not arguing a specific political position here (I doubt any party would have me).

Then again, I did say I was a libertarian socialist. :wink:
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Re: Ethical Investing

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Back to the topic of SRI proper, you may have seen my other thread where I noted that Pax World folded the EAPS ETF into an open-ended mutual fund that can no longer be accessed by CDN investors. Hence I am left without a low-fee SRI option for international investing. I have moved that chunk of my allocation back to a broad-based EAFE ETF but overall it irks me that they closed this ETF when it was the only one of its breed. Apparently it was doing quite well but Pax lost interest in managing it when their plans for a whole line of ETFs fell through and it became their only ETF under management. I wish they had just sold it to another ETF provider rather than fold it completely.
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Re: Ethical Investing

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parvus wrote:For the most part, I agree with George... Then again, I did say I was a libertarian socialist. :wink:
:thumbsup: Great analysis parvus. That's a lot of history in one post.
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Re: Ethical Investing

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So, if you guys want to invest in such an endeavor, why should my tax dollars support it. By the same token, if you wish to support a political party, why are my tax dollars used to help?
I don't intend to offend anyone, that part is just a bonus.

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Re: Ethical Investing

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kumquat wrote:So, if you guys want to invest in such an endeavor, why should my tax dollars support it. By the same token, if you wish to support a political party, why are my tax dollars used to help?
Because politicians make the rules.

If you wish to change this you will need to become a politician, only to discover that you will change your views rather than the rules. Such is the irony.
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Re: Ethical Investing

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What makes you think tax dollars were involved? The truly capitalist investor would run away as far as he could from real estate, oil and gas and small business, since their cost of capital is dependent on contingent tax breaks not available to business as a whole -- and therefore, their profitability is artificially inflated.

Similarly, better to have publicly funded tax rebates on political donations (that is if we care about democracy) than to have corporations able to deduct their political contributions as a business expense -- much like their lobbying costs.

I call for full transparency and the abolition of all tax favours accrued through special pleading -- it's good for business, it's good for homeowners, it's good for small business, it's good for families.

Scrap 'em.
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Re: Ethical Investing

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Shine wrote:After all his huff and puff, from years ago, Steve is flying around in government jets and using your tax dollars to raise funds for his particular political party.
Don't you think that is a bit inappropriate for a non-political financial thread?
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Re: Ethical Investing

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Norbert Schlenker wrote: how is it possible for BMO's ZEB to flourish? It's one thing to use a low cost ETF to get exposure to a broad swath of disparate securities, but it makes no sense at all to pay 0.55%/year to own equal sized chunks of the six big Canadian banks when commissions are $10 a pop or less. The breakeven point for an investor with as little as $5000 to devote to Canadian banks is about two years. Yet Canadians have parked $620MM in ZEB? Bully for BMO and its shareholders, because that's got to be the easiest $3.4MM/year (and getting bigger) annuity ever, but I'll be damned if I can figure out why this one incredibly simple to replicate and expensive ETF is 1/4 the size of Vanguard's entire ETF presence in the country.
I found above post by searching for ZEB.

I was looking for something to put in one of our TFSAs. Total available, about $7000. We already own all the major banks in other accounts, so thought maybe an ETF that holds all the banks would be suitable for this small TFSA investment. ZEB seemed like a candidate. But then I saw it's annualized distribution is about 3.3%. But the average dividend of the banks they hold is over 4%. How come? Then I realized it must be their management fee (0.55%?). Even that does not fully explain the difference.

XFN is just as bad.

So have put those out of my mind.
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Re: Ethical Investing

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Behind the G&M paywall
Norway wealth fund could blacklist four major climate culprits
The world’s largest sovereign wealth fund, which has massive market influence because it owns 1.5 per cent of the world’s listed shares, operates under ethical guidelines set by parliament.
There will probably be some who will accuse Norway of being hypocritical as their wealth has been accumulated with their one major resource namely oil but what's the real alternative to how they are proceeding?

There are new major forces taking shape in financial circles to focus on climate action.
UN appoints Mark Carney to help finance climate action goals
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Re: Ethical Investing

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Well, not only that but Norway is making huge investments to grow their oil production for export.

They are actually thinking about this the right way. The world will continue to need oil and vast amounts of it. Norway might as well be one of the production sources for this global demand, especially if they can produce and process it with less emissions and environmental damage than alternative suppliers. Canada, and its anti-oil investors, on the other hand, cannot seem to wrap their minds around separating the concepts around those two items. We should be embarrassed about the lack of grey matter being exhibited.
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