SMUG MONEY: What is a bad portfolio?

Written by Rebecca O'Connor on 24th May 2016

A few things over recent days got the old cogs turning on what exactly IS a bad portfolio. First was The Times front page story on the Church of England’s investment in Google. Then, there was Simon Read’s blog on Valeant Pharmaceuticals.

And then, a chat with my son’s future godfather, who jokingly suggested he would buy him a share portfolio including Philip Morris International and Wonga for his christening gift (sweet).

If you are a moral relativist, you might not see the harm in investing in anything that other people might view as bad, because to you, badness, like beauty, is in the eye of the beholder. And if you are clever, you can justify almost anything on moral grounds, if it serves some sort of perceived need. If you are liberal, you can do the same by prioritising freedom of choice.

Obviously, at Good With Money, we don’t think that any of the above views are helpful. Rather, we are of the view that goodness can be quantified and agreed upon universally (the clue is in the name). You might think this a tyranny of morality, but society’s ability to function is based upon an agreement of what is right and wrong. It’s just that we’ve got a bit laissez faire about this in some parts of life. Namely, our money. With potentially disastrous consequences.

So, because of all of the above, and because most of us still put profit or value above everything with our cash, some bizarre contradictions can arise between our moral views and our money: church goers investing in arms companies, women investing in companies with all-male boards, green energy developers investing their pensions into oil and gas, for instance.

For better or worse

But what about companies that you genuinely can’t categorise into the good or bad camps? For example: Google. On the one hand, it has had a beneficial impact on the world, making it easier for all of us to find exactly what we want to read about by simply tapping in a few words. On the other hand, the company is suspected of tax fraud and evasion.

In such cases, it is hard to come down on one side of the fence or the other. So the best thing to do is shine a light on the good and the bad practices within firms, so their investors can see clearly what is going on. You can’t stop bad things happening. But prevention, as they say is better than cure.

Nightmare shares?

Here are mine:

BAE Systems

Philip Morris International

British Imperial Tobacco

Randgold Resources

Glencore

Monsanto

Bayer AG

Pfizer

Barclays

HSBC

Tullow Oil

Centrica

EDF Energy

BP

Chevron

Exxon

Gazprom

Statoil

Peabody

Shell

Conoco Phillips

Saudi Aramco

Tata Steel

How can you judge them?

The list of activities in the table below from EQ Investors, a B Corps positive portfolio builder, shows what to avoid with your money, as well as what to look for to invest positively. The screens in the right hand column catch businesses that make a profit mostly from things that directly harm people’s lives, individually and as a society, and/ or harm the planet.

Positive issues (maximum score of 64 for positive inclusion) Negative issues (maximum score of 16 for negative screening)
Affordable housing Natural food production Alcohol Human rights abuses
Clean fuels Natural resource conservation Animal testing for cosmetics Medical research (Stem & Tissue)
Community engagement Pollution control Animal testing for medicine Mining
Education Public transport Armaments Nuclear energy
Empowerment Recycling Banking sector Oil & Gas
Energy conservation Renewable energy Fur trade Ozone depleting chemicals
Environmental focus Social change Gambling Political corruption
Ethical employment Sustainable agriculture Genetic engineering Pornography
Health care Sustainable forestry Government debt Tobacco
Job creation Water resources

What’s your nightmare portfolio? Tell us below.