By choosing to invest in companies that are doing good for the world, we not only stand to profit but can also improve the world in the process.
These two objectives are by no means mutually exclusive.
Driving growth
In his book Sapiens: a Brief History of Humankind, Yuval Noah Harari devoted a whole chapter to how capitalism contributed to the modernisation and growth of the world’s economy. He wrote:
“Capitalism distinguishes ‘capital’ from mere ‘wealth’. Capital consists of money, goods, and resources that are invested in production. Wealth, on the other hand, is buried in the ground or wasted on unproductive activities.”
Capitalism is, hence, one of the driving forces of real economic growth over the last five centuries.
But free markets that are solely after profits can be detrimental to society. The slave trade, for example, was the product of free-market capitalism. Harrari wrote, “When growth becomes a supreme good, unrestricted by any other ethical considerations, it can easily lead to catastrophe.”
To prevent this, investors should focus on ethical investing, rather than simply chasing after profits.
Investing responsibly can not only fuel economic growth but can also help drive innovation, promote good practices, and reverse climate change, among others.
Investors today are much more conscious of how they can do well while doing good. With that said, I have compiled a list of five ways investors can invest for the greater good.
1. Avoiding sin stocks
Tim Nash, the founder of Good Investing, describes negative screening as doing less evil.
By avoiding sin stocks, capital allocators force companies to rethink their strategy and discourage entrepreneurs from moving into the controversial sector in the first place.
Each of us may have a different definition of sin stocks depending on our personal values. However, some commonly cited “sin stocks” include weapons, fossil fuels, and cigarette companies.
2. Investing in green technology
We can also actively invest in companies that are striving to make the world a better place.
Climate change is one of the biggest challenges of the world today. It is, therefore, no surprise that investors are now prioritising green technology more than ever. But the success of green technology can only be achieved if both investors and consumers are willing to back it.
Some examples of green technology include solar power, electric vehicles, water purification, and LED lights.
Thankfully, it seems that the world is moving in the right direction when it comes to green technology.
In November 2019, the Singapore government announced that it will invest US$2 billion in funds that have a strong green focus.
3. Investing in necessities
In Singapore, we take clean water for granted. However, unsafe sanitation is still a massive problem in Africa. Unsanitary water contributes to more than 1,200 deaths of children under five years old per day.
The Bill & Melinda Gates Foundation has taken massive steps to alleviate the problem, through education and waste treatment technology.
Investors can contribute too. We can play our part by funnelling our capital to companies that are helping to alleviate the sanitisation problem.
Besides water, investors can also consider supporting companies that champion basic human rights, promote education, enable sustainable farming, and others.
4. Innovative companies
Some companies are improving the lives of millions of people simply through innovative technologies.
Take Alphabet Inc (NASDAQ: GOOGL), for example. The parent company of Google has increased its focus away from merely “organising information”.
Today, the tech conglomerate has investments in healthcare and autonomous vehicles, and even provides the world with faster Internet access through fiber networks.
Many of us also probably also use some of Google’s other applications that make our lives much easier, like Google Maps, Gmail, Google Photos, and even Google Translate.
Alphabet is certainly not the only company making a difference to the world.
Today, there are more tech companies than ever that are coming up with innovative solutions that are not only financially feasible but improving the lives of millions.
5. Healthcare
Another way we can invest for the greater good is by investing in healthcare companies. The pharmaceutical sector, for instance, is responsible for the innovation of numerous drugs that have saved the lives of millions.
However, pharmaceutical companies require bucketloads of cash to fund research and clinical trials.
While the biggest pharmaceutical companies are self-sustainable through the money earned from earlier blockbuster drugs, many are still in their infant stages. Such firms are desperately in need of capital.
Investors can help to fund research by investing in these companies. There is also the potential of profit should one of the pipeline drugs get commercialised.
Doing well while doing good
Contrary to popular belief, investing need not be solely for enriching yourself. By selectively investing in companies that are doing good for the world, we not only stand to profit but can also improve the world in the process.
My hope is that more investors use their capital not only as a means to enrich themselves but also for the greater good of the world.
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None of the information in this article can be constituted as financial, investment, or other professional advice. It is only intended to provide education. Speak with a professional before making important decisions about your money, your professional life, or even your personal life. Disclosure: Jeremy Chia owns shares in Alphabet.
Note: An earlier version of this article was published at The Good Investors, a personal blog run by our friends.
