Business Ethics Quarterly


Morals and Markets: The Case of Ethical Investing

Craig Mackenzie and Alan Lewis


This paper is a report of an empirical psychological study of the relationship between the ethical and financial beliefs and desires of ethical investors. Semi-structured interviews of 20 ethical investors have been carried out by the project 10 of which have been analysed using qualitative data analysis software. All of our participants faced the problem that, while they had ethical concerns, they were not prepared to sacrifice their essential financial requirements to address them. We found four common ways of dealing with this problem: they divided up their money into core and surplus accounts; they decided that it was enough to only be a partial ethical investor; they avoided detailed consideration of the costs of ethical investment; and they avoided rigorous ethical thinking. One equilibrium position arising from these responses is a portfolio approach to ethics, which allows people to assuage their consciences by investing only a small proportion of their investments ethically, while leaving the rest in non-ethical investment vehicles.

Craig Mackenzie is Head of Ethics Policy at Friends Provident, the largest ethical investment provider in the U.K. He is a director of the UK Social Investment Forum, Council member of the Institute of Social and Ethical Accountability, and a visiting fellow at the Centre for Economic Psychology at the University of Bath. He is author of The Shareholder Action Handbook (1993) and has a Ph.D. for a thesis on ethical investment.

Alan Lewis is Professor of Economic Psychology, Director of the Bath University Centre for Economic Psychology, and Editor in Chief of The Journal of Economic Psychology. The current research was funded by the Economic and Social Research Council (Grant No L122251017) awarded to Alan Lewis and Adrian Winnett at Bath University and Paul Webley at Exeter University. Other articles that have resulted from the project are “Support for Investor Activism among U.K. Ethical Investors” (forthcoming, Journal of Business Ethics, 1999, Lewis and Mackenzie) and “Morals, Money, Ethical Investing, and Economic Psychology” (forthcoming in Human Relations, 1999, also by Lewis and Mackenzie).