The issue of ethics in trading

Investing in fossil fuels has become an issue of ethics lately, especially with the issue of global warming plaguing our world today. The financial issues that investors face have now become more complicated with the additional dimension of ethics involved too.

Why do people think investing in fossil fuels is bad? They think that it’s unnecessary promotion of something that could be catastrophic to the world today. The issue of ethics isn’t just lodged in this one example, there are countless others.

Say it just came out that McDonald’s have been paying immigrants less than minimum wage to work 12-hour days,  for example. Some would say that this is cause enough for them to not invest in this company, as they would be promoting what essentially is a great evil in the world today.

My opinion, you ask? I wholeheartedly understand, but do not necessarily agree with the people who choose not to invest because of ethical reasons. Essentially, what they are doing is decreasing demand for the stock in question, creating a shift in the supply-demand curve and driving down prices.
Now, when prices are low (an example being WTI crude oil right now), people will invest. And when they invest, the price will be driven up again. So essentially, these people are not doing anything significant, rather, they perhaps might be worsening the cause they are supporting.

There is one scenario where I concur with these people, however – if they are doing it for their own personal reasons and gratification. They do not want to be associated with the unethical nature of a company and so will not invest in it, simply to give them a good guilty-free night’s sleep.

The majority, however, do it for the first reason which I have already explained. What these people don’t understand is that they are not having a monumental impact on prices, and their time would be better spent petitioning or protesting – that will have a far greater impact than simply not investing in a stock.

3 Comments Add yours

  1. Fawad Shah says:

    An excellent article- especialy for a 14 year old. Keep up the great work Shrey!

    Like

  2. Archit S says:

    An extremely interesting and topical blog post!
    A definition of some terms would be nice for those who have no idea about the stock market.
    Good job!

    Like

  3. Marcus Foux says:

    Hi Shrey,
    Great post! You seem like you know a lot about trading. I was wondering if you would like to join the Entrepreneurs and Professionals Society as a comitee member

    Like

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