Why Do We Invest Ethically?

Understanding investor behavior is no easy task. The capriciousness of human nature generates a seemingly endless variety of behaviors that manifest themselves in interesting ways when individuals pit themselves against the markets. One particular type of behavior that has emerged over the last 20 years or so is the desire to invest ethically. Our analysis of why we invest ethically goes some way toward advancing our understanding of ethical investor behavior. Our empirical contribution is a survey of both shareholders and prospectus requesters (who did not make purchases) of Earth Sanctuaries, Ltd., which we describe in Beal and Goyen [1998a, 1998b]. With a stated objective of conservation and a financial focus on stability rather than maximizing shareholder returns, ESL provides an ideal opportunity to gather data to aid our understanding of ethical investor behavior. At the time the sample for this study was selected (1999), there were about 7,000 prospectus requesters and shareholders of ESL. A random sample of 1,400 (or 20%) was selected to survey. Corporations and overseas investors were excluded from the sample. In all, 943 responses were returned, 788 from current shareholders and 155 from prospectus requesters, for a net response rate of 67%.