Socially Irresponsible Investing8 min read

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Investor - CEO at IMA, educator, writer - author of The Little Book of Sideways Markets.

The article I am about to share with you has been in the works for three years. I started and failed at finishing it half a dozen times. I want to warn you, this is an apolitical article. I go out of my way not to take positions on any issue – not because I don’t have opinions because they are generally irrelevant to my articles; but in this one I wanted to demonstrate the practical complexity of socially responsible investing.

Socially Irresponsible Investing

Socially responsible investing. Awesome! What’s not to love – your capital doesn’t just enrich your life, it also flows only to companies that do social good. Hopefully, if enough people did this, companies that harm society would face higher capital costs as they received less capital, and they’d die out. The best features of capitalism and socialism wrapped into one nice tidy package.

This sounds great, just as socialism was music to Russian ears a hundred years ago. Nobody goes hungry and everybody is happy. I lived under socialism, and both of my able, highly educated, and fully employed parents struggled to find food on a regular basis for our family. Surprisingly, my childhood was still happy, but that has to do with the love unconditionally given by my parents, not socialism.

Socially responsible investing on an institutional level, where one body makes “socially responsible” capital allocation decisions for a pool of investors, is a utopian concept, just like socialism.

It is simply impractical.

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Vitaliy Katsenelson

Investor - CEO at IMA, educator, writer - author of The Little Book of Sideways Markets.

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