Recently, I wrote about lending money on Prosper, which is one of the many peer-to-peer lending networks that are popping up everywhere. The post itself didn’t say anything about socially responsible investing (also known as, SRI, morally responsible investing or ethical investing). However, a lively discussion on this topic came up when Kevin stated his opinion as follow:
“…If these people were in control of their finances, they wouldn’t be borrowing money on the internet. Basically, you’re choosing to profit off of people’s idiocy and desperation. I don’t think that I, in good conscience, could do that to people. You’re participating in the destruction of people’s lives. Morally, I don’t think it’s a good thing to do and I don’t agree with it…”
If you read Kevin’s full comment and subsequent comments, you will find that he is sincere and strong in his conviction about this matter. For me, I am not as strict when it comes to socially responsible investing, and to which I replied:
“…For me Prosper is strictly another way to invest and grow my money. This is no different than investing in the S&P500 and being part owner of companies that profit from cigarettes, weapons, sub-prime loans, etc…”
And Kevin responded:
“…And no, it isn’t like investing in the S&P 500. The S&P500 doesn’t give you the choice of how your money is used. With social lending, you are directly engaging-in and advocating the behavior…”
My viewpoint was subsequently supported by one of my blogging friends, Brip Blap, who wrote:
“…And by the way, banks lend people money, as well — having a checking account or a savings account means that your money is being lent out to people in these situations. And if you invest in the S&P 500, you are directly investing in those companies and then they are using it for good or ill, just as the people I lend money to at Prosper are. If you buy an index fund, you are tacitly approving your money’s use by big pharma companies or Wal-Mart or defense contractors. I don’t see how you can say you can’t say how your money is used. I can’t tell people at Prosper how to use the money I loan them any more than I can tell Exxon how to use the money they got from me from my S&P 500 index fund investment…”
And another blogging friend, Mike from Money Smarts Blog wrote:
“…If you take five minutes to look through the names of companies that make up the S&P500 you will recognise companies that sell alcohol, cigs, weapons etc pretty quickly and you have the choice not to buy that index. It will make investing a lot more work to avoid those companies (and as Brip Blap says, make sure you include the banks in this list) but it can be done…”
The point of this whole post is not to say who is right and who is wrong. I am sure we can find people to agree with either side. The point is there is no right or wrong when it comes to socially responsible investing. This is one of those very personal decisions that each of us make based on our core value, upbringing, and experience.
For me, investing is a tool to achieve financial objectives. If investing in the S&P 500, which components include companies like Citibank, ExxonMobil, and Altria Group means that I will achieve my financial objective more effectively, then I will invest in the S&P 500.
What is your thought on socially responsible investing? Specifically, do you think lending in peer-to-peer networks like Prosper and Lending Club is morally wrong? I would love to hear your perspective on this matter.
More about socially responsible investing: