Ethical investing is harder than it looks – here’s why

When making a quick judgement on a company or other investment proposition, don’t take any assertions of ethical behaviour at face value, writes Hamish McRae

There is the wider issue of whether a company that drills for oil or makes armaments could ever be deemed ethical (REUTERS)

It is a tough one. Do investors have to choose between ethics and profits? It ought not to be a choice, for companies that behave badly usually get their comeuppance in the end, while those that treat their customers and employees well ought to be able to make decent returns.

But in the real world, the comeuppance often seems to take a long time a-coming, while truly ethical companies sometimes lack the drive to produce good profits.

The debate has given a new twist to ESG investing – putting money into companies that have approved environmental, social and governance performance – as we explained a few days ago. It is an enormous, multi-sided issue, and people have strong views on both sides.