Increasingly, Australians are realising that investment today shapes the world we live in tomorrow. The truth of the matter is that while we get to vote once every three years, our money votes every day. For this reason, socially responsible investing is becoming more and more popular.
Those who suggest that ethical investing (whatever those ethics may be) yields lesser returns have no evidence to back up their claim. In fact, there is some evidence that during downturns ethical portfolios outperform the relevant MSCI Index. I believe it's perfectly possible to thump the market without investing in mining, tobacco or gambling.
In that spirit, investors in big banks should be aware that they are heavily invested in a large number of questionable mining projects. For example, ANZ (ASX: ANZ) is a key backer, however unintentionally, of the destruction of the Leard State Forrest by Whitehaven Coal (ASX: WHC). The Maules Creek expansion is completely unnecessary and offers few advantages to Australia. However, it does require the destruction of a critically endangered ecosystem and threatens 23 endangered species. Needless to say, Whitehaven and ANZ shareholders will profit today, but the scarred landscape will stay broken for generations.
The banks are the silent partners in this kind of deal. They stand to lose far less than the mining companies, but these kind of socially irresponsible projects would not be possible without them. Perhaps the most controversial new projects are the coal and gas operations that are likely to permanently damage the Great Barrier Reef.
According to Market Forces, ANZ has lent $2347 million to such projects, the Commonwealth Bank (ASX: CBA) has lent $1.5 billion, the National Australia Bank (ASX: NAB) has lent $1.45 billion and Westpac (ASX: WBC) has lent $1.2 billion. The majority of readers won't be bothered by this fact. Ethics are a personal choice, and I respect those who disagree with me.
However, investors who are concerned for the preservation of the reef might want to consider selling their bank shares, especially now that they are fairly expensive anyway. It also might be of interest to know that Westpac is the banker for Aristocrat Leisure (ASX: ALL). Aristocrat specialises in making poker machines, and as you can imagine, the best poker machine is the one that entices the most money out of gamblers. Given the damage that the pokies inflict on the families of addicts, it is fair to say that Aristocrat indirectly profits from suffering.
Foolish takeaway
Some people are perfectly happy to profit from an activity that causes harm, while others try to balance the desire for profits with the wellbeing of society. Other people simply disagree that gambling addiction or coal seam gas exploitation is harmful. However, many people who do oppose the destruction of the Great Barrier Reef have yet to reflect that in their investments.
As capital flows away from harmful projects, so too will the power of their proponents. Everyday investors are often more influential than they realise.
