Ethics of Investments

How do Ethics and FIRE mingle? This appears to be a topic that a lot of people struggle with, at least that is the feedback that we received after the last Meetup in Eindhoven. For the next meet up we will likely add a discussion on this topic. This development also caused us to rethink various question(s). What do we think and why? How does it affect our investment decisions? Today we look at Part 2.

Ethics and FIRE

For sake of clarity I’d split the Ethics and FIRE discussion into two main components:

  • Ethics of FIRE itself (i.e. “living off the system”, while paying relatively little taxes and social security premiums), as discussed earlier this week; and,
  • Investment ethics (e.g. investment in oil, weapons, energy, real estate, cigarettes, etc.).

Today I’ll focus on the second part: Ethics of Investments.

The Ethics of Investments

This one is bound to really stir up some opinions 🙂 Please don’t hold back! Let’s have a look at a few of the industries/sectors and discuss, shall we?


Stating the obvious here: smoking is really bad for you, period. But it is one’s own decision to start smoking, so is to quit smoking. It’s a personal responsibility. From a health perspective I don’t mind that it is discouraged via taxation. Heck, if it was me the taxes would go way up, or better abolish smoking by law. There are simply no positives about smoking.

Ethics of Investments - Cigarettes
Ethics of Investments – Cigarettes

That being said, investing in cigarette companies appears to be very lucrative. Companies such as Phillip Morris have proved to be a very good investment decision over the past decades. They are great dividend stocks. But would buying it be unethical? Would you stimulate smoking by owning shares in a company that produces cigarettes? I personally don’t believe so. Yet we don’t invest into this sector either. I don’t want my money to facilitate a habit that is so disgusting. Perhaps we are loosing some ROI and diversification in the process, but we are OK with this.


I’m going to group small guns and all the way to army weapon systems into one sector here for sake of convenience. Contrary to cigarettes (where you make the choice), it’s the government that has the biggest impact on this industry (or lack thereof due to influential lobbying).

It’s an industry that is driven only in a small part by private consumers, the majority of the buyers are governments (especially on the “commercial” side of things). In short, my wallet does have little to no impact on this sector (but my voting rights may!).

Ethics of Investments - Weapons
Ethics of Investments – Weapons

This is also why we don’t own any shares in companies that produce weapons. It’s the only way to have an impact (if any). Again, we will lack some diversification and yield as a result. But that is a trade-off that we happily live with. At least our money is not used to destroy each other.


Again, for sake of convenience, I’m going to combine both oil & gas and utility companies together. Both are sectors that concern energy production, distribution and usage. Whether this be for your car, your holiday flights or the heating of your house.

As noted earlier, I don’t think I have much impact as an investor. But I do have a “major” impact as a consumer. When I use less fuel, electricity or gas, I directly affect the core business of these companies. If I actively purchase “green” energy, companies will see new business opportunities and modify their business models to capture this “new” market. Prices go down and we have a global win-win.

Ethics of Investments - Energy
Ethics of Investments – Energy

Furthermore, these companies operate under environmental licenses (or lack thereof) issued by governments. So if I really want to have an impact, my voting should do the trick. By voting green parties you could have some impact on legislation, which in return could affect how these companies do their business.


For mining companies the same applies as for the Energy sector. By consuming less “stuff”, you need fewer resources, this less demand on products thus fewer unethical practices. You vote with you wallet! Same as with the energy industry, governments and legislation (and verifying that legislation is followed!) also have a direct major impact. If you want change, you have to vote.

Sure, there is something to be said that you don’t wan to support companies that are knowingly not adhering to environmental and ethical standards and policies. Some of this misconduct finds it’s way out in the open via the main stream media. In that case you can make the decision not to invest into that specific company.

Ethics of Investments - Mining
Ethics of Investments – Mining

In short, we invest in the mining (and energy and utility) sectors, we have no (major) ethical issues with it as we do try to affect their business model via different routes. We do try to select companies that have a reasonable track record from an environmental stand point.


We actually own shares in airlines. It was part of a diversification strategy to include this sector as well. However, the airline industry is one of the most heavily subsidized industries on the planet (after the agricultural sector). Which makes sense once you realize that a flight within Europe can be cheaper than driving with your car. With “normal” economics that should never be possible. This is obviously driving major growth in this sector (and associated sectors like tourism and trade). The downside is a significant environmental impact, considering flying is the most polluting form of transport.

Is it therefore unethical to invest into this industry? In my opinion it is not. Ultimately the responsibility of whether to fly lies with you. You might be able to drive, bus, train, boat, cycle or even walk to your holiday destination. It might not go as fast, but it is often a possibility (notable exception is if you need to cross the big ponds, a boat will take a while). Same with business meetings, a telecon might work just as well.

Ethics of Investments - Planes
Ethics of Investments – Planes

If the government starts to get real on conservation and sustainability, the subsidies will be reduced and the sector might become less profitable. By that time we will have moved away from this investment sector and deploy the cash elsewhere. In the mean time, we try to limit our travel by air and offset some of the damage where possible.

Real Estate

As you are likely aware we are real estate investors. Is this ethical? I would say yes, assuming you are sticking to applicable laws and regulations. In fact we are providing housing solutions to people that need a temporary place to live (before buying their own or moving in with someone else).

We do make a good profit at the end of the day on these investments. But we also accept the risk and obligations that come with this investment form. The latter is the reason why we also think this is an ethical investment, it’s not a free for all. It’s also a voluntary decision by the tenant to sign the binding contract to use your (living/working) space.


There are obviously many more industries that have ethical aspects to it. The agricultural sector also springs to mind, specifically the livestock production. When ranking environmentally damaging industries, this one comes in close to the top. Especially when combining the effects of methane, CO2, air & water & soil pollution, antibiotics and animal cruelty.

Ethics of Investments - Agriculture
Ethics of Investments – Agriculture

But as mentioned before, we as consumers have the biggest impact. Just eat less or no meat and you will be doing yourself and mother nature a big favor. But is investing in this industry unethical? I would again say no, but there is one company we will never invest in, which is Monsanto. Their way of lobbying and doing business (treatment of (organic) farmers) is just too unethical for my taste.


Another interesting sector is the pharmaceutical industry (in combination with the medical profession). I would love to make it my personal mission to spend little to no money here by living healthy. There are obviously many products they provide that are either convenient (think painkillers, cold medication, etc.) or very useful (cancer treatments, medical equipment, vaccinations, etc.).

However, the pharmaceutical lobby is very powerful and has a major impact on government politics (and doctors!). They are very good at selling their products. To be brutally honest, they don’t benefit from a healthy population! It’s actually best for them to just have you be slightly ill (read chronically ill) so they can keep selling your medication (think diabetes type 2, high blood pressure, blood thinners, cholesterol lowering, etc.). Simple fact is that you can get avoid or eliminate most of these with dietary changes (it takes an hour, but it’s worth watching this video).

It’s not uncommon for the pharmaceutical industry to produce research (highly recommend watching this video, very good) that confirms the “need” for their products. This is obviously far from ethical behavior! Unfortunately, the only way to control this industry is by government regulation, which is nearly non-existing due to strong lobbying. A catch 22….

Discussion and Conclusions

As mentioned in the previous post, ethics will mean a different thing to everyone, which makes for interesting discussions and decisions. Same as “personal” finance, ethics is very much personal too. Ultimately you have to do what feels right to you. That being said, it might not be such a bad thing to also look at how your decisions impact others, directly and indirectly.

I believe it is the governments responsibility to limit sectors that have a negative impact on humanity and stimulate sectors that have a positive impact. I also believe that we as consumers can have a far larger impact with our wallets than with our investments. By not buying certain products, or buying less of them, we affect the business models of many companies. Thereby we stimulate change in certain sectors.

That being said, you as a shareholder have “some” impact on a company. You have voting rights. But considering most people and institutions invest to make money, very few will use their right to make businesses noticeably more sustainable or force them to change their core business model. But it does occasionally happen (think Shell).

Personally, I rather keep voting with my wallet and change our investment strategy depending on how businesses are doing, rather than what they are doing (with a few notable exceptions). It is also key to make sure your investments make good yields or capital gains, especially is you want to become and remain FI. Finding the right investments that combine this trait, but still adhere to your ethics can be a challenge indeed.


What’s your strategy to combine ethics with investing?


  1. I don’t believe in the ethics of investments.

    Every company is created to make profits in the first place and help people is a nice side effect. In my opinion, there are no ethic investment sectors. Sure the tobacco and weapon industry come to mind but what about companies like Coca Cola or Pepsi? Elevating the risk for diabetes and obesitas. What about a textile company like Van de Velde which outsources their production to a cheap African country to pay less (there are tons of companies doing this)? If a company truly wants to be ethical, it will go bankrupt in a few years because the competition will simply kill them.

    I don’t even think that the weapons industry is any less ethical than the food industry (what about animal mistreatment then?) because Defence delivers safety which is fundamental for an economy to develop and maintain. Weapons are a necessary evil.

    It’s hard to draw the line between ethical or unethical, are you not going to invest in a company because one of their biggest customers is a tobacco producent or arms distributor? I think putting up too many ethical measures is wiping out nearly all investments opportunities.

    Eventually, in my opinion, we all have to do where we are comfortable with! 😉

  2. Interesting subject! For me, ethics play a very big role in investing my money. Money gives you power to have some influence in the world and our future. For example, I do not agree with a lot of things Shell does, but I did join an initiatieve to buy shares to have a saying in their policies. For me, an early retirement, our earning loads of money is less important than te big picture. And still, one can make an economic profit and a money profit at the same time. So I do not agree with Dividendgeek on that. There are so many examples, even banks like Triodos work that way. Let’s not close our eyes but take our responsibility.

  3. I’m not really a big fan of the weapons industry, however they also do protect the ‘free western wor(l)d’. I’d rather have no war at all but in some cases it might be needed. Weapons/defense would be ok for me, but I do skip the tobacco industry as well.

    It’s a nice discussion and you can keep going on.

    It’s the same with voting. Do you vote for ‘GL’ to support the green revolution or do you prioritize your own money and support the ‘VVD’..? Or something in between 😉

    1. I tend to vote center, I’m more of a compromise type of person. Don’ think either left or right is a good way to go. Life is grey, not black and white.

  4. Interestingly this is the second article on ethics that I have seen today 🙂 Response same:

    There is something immoral about trading. For someone to make money, someone else needs to lost it (there is finite amount of money in the society). However, if socially conscious investing gives better returns I would give it a try. I believe lots of sovereign wealth funds follow socially conscious investing.

    1. Hello DG, pretty sure you are not alone in wanting to invest in investments that are socially and environmentally conscious, but still make a good returns. There are definitely products out there, but they are far and few in between to really combine both in an successful way.
      Thanks for the comment!

  5. I agree that ethics is often an arbitrary, subjective and personal issue. In the case of investments in stock, I think the question is the same each time: do you agree with the policy of a company. The argument “if they don’t do it, someone else will do it”.
    In the matter of real estate I miss an important matter: what about disrupting the market? Bernhard Jr. maybe abides the law, but he singlehandedly disrupts the entire housing market of Amsterdam. Do you take this into account when investing in real estate?

    1. Good point on the RE, looked at it from a personal perspective, not the “commercial” side of things. We are, and will never be, this big. So doubt we will every have a disrupting influence. Therefore I doubt we will every really create an unethical situation.

  6. I see how ethics are very important in investing and our lives in general of course. But it’s so difficult to focus on them when investing. For instance, I’ve never smoked, and I would never even possibly consider smoking. However, saying I won’t invest in a mutual fund that has a cigarette company in it is okay in theory, but what about soda and sugary drinks? There are tons of other unhealthy foods that cause diabetes and disease that you could argue are just as bad or worse as cigarettes! So do you not do not invest in any food companies that might have a food that is bad for you?

    It’s a very slippery slope and it’s too difficult to draw the line. To me, people have to make their own choices about what products they’re going to buy. Great post!

    1. Good point on the food side of things, didn’t discuss it here but it fall in the same category as smoking, pharmaceuticals, etc. At the end of the day, you have to make the decision what’s still acceptable for you, that line is very arbitrary indeed, but I guess that is just fine.
      Thanks for the comment AF!

  7. For me ethics play no role what so ever in an investment decision. Finding really good investment opportunities is hard enough. Still a bit miffed that the girlfriend walked away from the Bayer Monsanto take over arbitrage play! I called it correctly and the Monsano shares are now very close to the take over level (even had the timing pretty right!), her ethics cost her close to 10.000 euro!! Good arbitrage opportunities like that are f*ck*ng rare and then have ethics come in and throw it out of the window, grrr!! And yes, I too find Monsanto an awful company, but there was a nice profit to be made of it …

  8. “I also believe that we as consumers can have a far larger impact with our wallets than with our investments”

    Care to elaborate? It seems like you are suggesting to people not to buy services and products from the companies in which you invested in, doesn’t make much sense.

    1. Love to elaborate, yes I do suggest to people not to buy products and services from several of the companies where are invested in. Would make the world a better place and we would shift our investment else where as a result, hopefully into investment products and companies that do make a difference (and a good return on investment).
      Is this a contradiction, absolutely. Is it unethical to benefit from the current system, perhaps. But it’s the only way I see how I can get to FIRE in the short term with having the ability to do good (better?) in the longer term.

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