Thinking of investing in an ethical fund? If seeking even higher returns is what you are after perhaps we could interest you in a ‘sin portfolio’? A sin portfolio consists, typically, of shares in gambling, tobacco and alcohol, arms and ‘adult services’. One study of ‘sin portfolios’ in 21 countries, undertaken by Frank Fabozzi, found that they outperformed the stock market indices in every year but two between 1970 and 2007. Or maybe you might want to consider a ‘Vice Fund’? This made returns of 43% between August 2002 and May 2009 as compared with a 15% average return on the Standard and Poor Index. Does it pay to be just?
Advent 2009 – A World In Waiting
Week Two – A New Covenant
Day Three – Doubting the Covenant
‘You have wearied the Lord with your words. Yet you
say, “How have we wearied him?” By saying, “All
who do evil are good in the sight of the Lord, and he
delights in them”. Or by asking, “Where is the God of
justice?” ’ Malachi 2:17
Thinking of investing in an ethical fund? If seeking even higher returns is what you are after perhaps we could interest you in a ‘sin portfolio’? A sin portfolio consists, typically, of shares in gambling, tobacco and alcohol, arms and ‘adult services’. One study of ‘sin portfolios’ in 21 countries, undertaken by Frank Fabozzi, found that they outperformed the stock market indices in every year but two between 1970 and 2007. Or maybe you might want to consider a ‘Vice Fund’? This made returns of 43% between August 2002 and May 2009 as compared with a 15% average return on the Standard and Poor Index. Does it pay to be just? When one surveys the extent of fraud, bribery, cheating and transactions in the ‘black economy’ one sometimes begins to wonder whether only fools play by the rules.
Throughout the financial sector, insider trading is rampant. Conflicts of interest are endemic – between auditors and the firms they are auditing, and between investment bank researchers and the clients whose money they are investing. As for fraud, probably the most common form is embezzlement or pilfering by employees. The sheer scale of it all is mind-numbing. It has been estimated that fraud costs the UK economy at least £20 billion per year and, in a recession, the level of fraud appears to be on the increase. Cifas, a business anti-scam group, found that employee fraud had increased by more than two-thirds in the first half of this year. Senior managers have resorted to manipulating accounts, often in a desperate attempt to keep their jobs or to keep their company afloat. Then there are inflated or false insurance claims, also on the rise. Most pervasive of all is the ‘black economy’ – people who pay and get paid in cash so as not to declare tax.
Had enough? What about neighbors shop-lifting, people traveling on trains without a ticket, students cheating in exams, job-seekers lying on resume’s, and being encouraged to do so, and highly-paid professional athletes breaking the rules? Everyone, it seems, is on the make, from self employed builders, to City whiz-kids, to Members of Congress. Without bribery, the Government itself has argued, defense contracts ‘crucial to our national interest’ are likely to be lost. So why be the odd person out? Does it pay to be just?
It’s true, of course, that not everyone gets away with it. Some of the world’s biggest frauds – Enron, WorldCom, Parmalat, Siemens, Bernie Madoff – have been found guilty of financial misconduct on a mammoth scale. And enforcement agencies are beginning to get tougher. But, even so, investigations into insider trading have resulted in few arrests, partly because insider trading is extremely hard to prove. In September of this year, the Office of Fair Trading in Great Britain imposed fines totaling £129.5 million on 103 construction firms in their country which it found had colluded with competitors on building contracts, between 2000 and 2006. The City of London Police have set up a special anti-fraud unit and, at national level, the Fraud Strategic Authority has set up a national fraud reporting centre. Here at home both the U.S. Secret Service and the F.B.I have established Financial Crime Divisions and much is being done in the area of fraud in the health sector. Some fraud investigations are being more proactive going so far as to use weapons such as covert surveillance, phone tapping and mail interception so as to prevent rather than simply investigate cases of fraud. But, sometimes even those businesses which have been victims of fraud decide to cover it up so as to protect their firm’s reputation. So much goes on below the radar that it is almost taken for granted that that’s what one has to accept. Does it pay to be just?
Well, sometimes it does. The investment fund which manages several of the funds of the Church of England as well as some charity and local authority funds, has given priority to ethical investment (defined in consultation with its clients) and its long-term perspective has enabled it to weather the current economic crisis better than many. We have available a World Peace Tax Fund and there are other ethical investment funds which have performed relatively well. But with so much dishonesty woven into our daily practices it’s hardly surprising that sooner or later deeper questions arise – not just about dishonest people, but about the whole system. And from cynicism about the system it’s a small step to cynicism about ‘human nature’. That, in some ways, is what Malachi was up against. It was clear to Malachi where such an attitude would eventually lead – to a suspension of belief in a just God. The promises of what things would be like after the return from exile had not materialized. If God was reneging on the covenant, why should the people take it seriously? So what was wrong about the priests’ and people’s holding back their finest goods and offering inferior goods for sacrifice? To this Malachi delivers the charge: ‘ “You have spoken harsh words against me,” says the Lord. “Yet you say, ‘How have we spoken against you?’ You have said, ‘It is vain to serve God. What do we profit by keeping his command or by going about as mourners before the Lord of hosts? Now we count the arrogant happy; evildoers not only prosper, but when they put God to the test they escape’ ”. (Malachi 3: 13-15).
But the Day of the Lord will come: ‘ “I will appear before you in court, prompt to testify against sorcerers, adulterers and perjurers, against those who wrong the hired labourer, the widow and the orphan, who throw the alien aside…”.’ (Malachi 3: 5-6).