That's the question.
The release of the Fool's Sin Stocks report couldn't be more timely in my view. Here we are in the midst of such soul-searing investment issues as war and insurrection in the Middle East (arms and energy sectors), earthquakes in my birthplace of Christchurch (insurance and construction) and tsunamis in Japan (just about every sector).
So the big question is: To what extent should investment philosophy be ethically led, if at all?
Fraught though the subject is, sometimes it's just plain obvious. Only the most determinedly amoral Fools, for example, would want to invest in Gaddafi Enterprises, if there was such a business, although it would surely be smart to go short on it.
Bags of cash
Having said that, the $170bn in Libya's sovereign wealth fund -- a tool of the dictator and his inner circle -- proved irresistible for the western world. It has investments in everything from Juventus football club to Switzerland's Tamoil refinery.
More problematic is currency trading. After the tsunami brought general misery on Japan, forex desks made coldly calculated speculations on the yen, because traders knew there'd be a massive inflow of the currency in the wake of post-tsunami insurance payments. It took governments to set things to rights by selling $25bn in yen to drive down the currency.
For what it's worth, my opinion is that sin is in the eye of the beholder. Another way of putting it is that Fools shouldn't get too puritan about all this.
First, a declaration of interest. I don't gamble (boring), smoke (bad for triathlons), get drunk (too painful), take "recreational" drugs (pointless) or own a car (prefer to walk, run, ride a bike or take public transport).
But I think Las Vegas is terrific fun, enjoy the aroma of cigars, hardly ever miss my two pints a night, and have nothing against Big Oil. I wouldn't however invest in any kind of drug company, recreational or otherwise.
Banking with principles
Which brings me in a roundabout way to sustainable banking. Given the absurd remuneration packages, general incompetence etc. etc. of too many of the high street banks, I can't bring myself to feed their voracious maws with my investment morsels, puny as they are.
Sustainable banks I can, however, back for the most selfish of reasons -- it makes me feel good to do so.
Institutions such as Netherland-headquartered, UK-branched Triodos Bank and the rest of its 13-strong group around the world do business under the irresistible, post-financial crisis motto of "people, planet and profit".
And they are profitable. Although Triodos will never worry the likes of Barclays (LSE: BARC) -- its UK branch loaned upwards of £500m last year -- it hiked operating profit by 20% last year through loans to such admirable projects as a solar-powered dairy farm in Glastonbury and an old people's home in Abbeyfield.
Every single loan made in the financial year is explained in the annual report so investors can see the bank's as good as its motto.
The numbers are pretty impressive too. How about a capital ratio of 14.7%, way ahead of the Basle III timetable, and a 20% jump in customers last year? Triodos pays a divvie of just under 2%, too.
Sustainable banks like Triodos, Alternative Bank Switzerland, Italy's Banca Etica, Peru's Mibanco, Canada's Vancity, Norway's Cultura Bank and America's New Resource Bank aren't ethical investments. They're sustainable investments, the difference being that the former refuses to put money into projects that do harm while the latter invests only in those that do good. It's called "negative screening" versus "positive screening".
As well as offering the usual services of a bank from loans to accounts, they're giving do-gooding a good name. Alternative Bank Switzerland proudly lists the number of women it employs (42 out of 80). Banca Etica sells cards tied to Amnesty International. Canada's Vancity opened its doors 60 years ago to serve a poor community shunned by mainstream banks and, way ahead of its time, made loans to women without male co-signatories. Several of them, like Mibanco, are big microfinance lenders.
And they seem to be on a roll. America's New Resource Bank is only four years old but total assets have gone from practically nothing to $155m, all while improving total risk-based capital ratio to 17.4% -- HSBC's (LSE: HSBA) is 12.1% by way of comparison. Vancity's return on equity is 7.3%, marginally ahead of Barclays.
There's certainly good returns to be had from good-time companies but, as financial consultancy Celent pointed out in March, the socially responsible market is going places too. In Europe, investment is heading for €2 trillion.
And yet we can see all too clearly we also need fighter planes and missiles. It's enough to drive a man to drink!
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