'The problem is that tracking the market means owning shares in companies that are not in keeping with Quaker testimonies.' Photo: by Anne Nygård on Unsplash.
‘His desire was to enable ordinary people to achieve financial security.’
Not costing the earth: George Penaluna’s saving grace
Jack Bogle was a well-known friend of Friends in the USA. He died last year. Having known financial hardship in his youth, his desire was to enable ordinary people to achieve financial security by careful money management and simple investments.
He observed that mutual fund investment companies charged high fees yet often did no better, or even worse, than the stock market overall. This led him to conclude that ‘stock-picking’ was as much about good luck as it was a skill. He used to say, ‘There’s no point searching for the needle in the haystack, just buy the haystack!’ Thus index, or tracker, funds were invented. They didn’t try to beat the market, simply to match it. And because there was no research or analysis involved, the management charges were much lower than traditional investment funds.
Bogle established a company called Vanguard to sell and manage index-tracker investments ‘at cost’. Its investors were the owners, so there were no shareholders to pay dividends to – effectively a form of co-operative.
This ethos, in its own way, is very Quakerly. Simple, easy to understand investments with very low charges that were fair and transparent, so that ordinary investors kept more of their money. I’m a great fan, but unfortunately I can’t subscribe to any of their investments.
The problem is that tracking the market means owning shares in companies that are not in keeping with Quaker testimonies – traditionally those trading arms, alcohol, tobacco, gambling or pornography, now expanded to include fossil fuels and tax avoidance.
Ethical investment funds have been around in the UK for over thirty-five years. The Quaker-linked Friends Provident Stewardship Fund was established in 1984. Since then the fund management industry has launched a myriad of different ethical funds, each with its own ethical screening filter. But it is incumbent on individual investors to ensure that the filter meets their own concerns. As time has progressed, fund managers launched socially responsible funds, environmental funds, sustainable funds and now, with greater recognition of climate change, ESG funds (environment, social, governance). Dig under the surface, however, and you discover ‘sustainable’ funds are invested in the likes of Microsoft, Procter & Gamble and Adobe; socially responsible funds have Shell, BP and Nestlé; and ESG funds have Amazon, Google and Toyota. So it seems that if it doesn’t say ethical on the tin, it isn’t ethical in the tin. And even then, you have to check! EIRIS, the ethical investment research service (started by a Quaker), created a useful website at www.yourethicalmoney.org which analysed how stringently different funds were screened, but the website is now out of date and being revised. Ethical Consumer magazine probably has the most current analysis of ethical funds.
Having money to invest is a privilege, when many people are not able to. Investing it with care, and being guided by ethical criteria, are responsibilities we should all willingly accept.
George is advertising manager for the Friend.
