This is the follow up post to this one here.
Thanks for everyone’s input on this – I hope you enjoyed it as much as I enjoyed writing it. People’s answers demonstrated the two basic philosophical approaches to looking at the problem:
a) A deontological or Kantian ethics approach: that investing in weapons manufacture is intrinsically not social. Therefore neither ethical nor social.
b) A utilitarian approach: that investing in this weapons manufacturer would overall reduce loss of life and civilian casualties and is therefore a social investment.
In my limited experience when there is an argument between people where one is taking a utilitarian approach and the other a Kantian the best thing to do is to leave and go to the pub, as they are starting from such different background frameworks they are unlikely to achieve consensus.
A route that combined the two was put forward by Phil Caroe of Allia (thank you Phil), in an ethical investment model: If you believe weapons are unfortunately necessary, and therefore in your universe of acceptable investments, then this investment would score highly on a comparative basis with other potential weapon manufacturer investments. This combines the two by using rules to determine your investment universe and then comparative methods to make a selection. My only concern with this is that it is a passive investment methodology, where your starting point is that you have money to invest and a set of possible investments, which are the best ones?
So where do I come out on this? Well if we apply an active impact investor type model for understanding this investment, one would look at three elements:
a) Does it have a sensible theory of change or evidence base? In other words do we believe that its actions will lead to the outcome that it is seeking.
b) Is there a better way to achieve the goals than the way proposed?
c) What might be the unintended consequences and are they serious enough for us to worry about?
When understanding a) there are a number of attractions. The model has thought through a best angle of intervention, where the pressure points might lie. It has thought through how to be credible to its target audience. It understands the market it is in and the change it is seeking to create. There isn’t any evidence base of course, but this kind of change agent role wouldn’t have an evidence base.
As for b) a much deeper analysis would be required with the team and talking to external experts. Other possibilities might be more grant funded, campaigning or lobbying for example, but we should be able to compare them and then make an assessment rather than allowing our chosen investment methodology to determine our answer.
If I have any concerns, it is around c) unintended consequences… In other words the What Ifs? For example, if they made land mines more acceptable again, would more countries start using them again? One can start getting into quite deep analysis of the value of improving defensive strategies if you aren’t careful. To use a different example, Drones are, some might argue, the ultimate social weapon as they minimise civilian casualties and focus on the bad guys. But their very nature makes them easier to use, more acceptable even. The potential consequences of that ease of use are still playing out. There is quite a good discussion on this on the moral maze, a BBC radio programme. You can download the podcast here (The one thing it does demonstrate is that the last person you want sitting at the other end controlling the drone is Melanie Philips from the Daily Mail).
So I would not be inclined to invest myself. But if someone with real expertise in the area felt they had explored all the other options, and that this was the strategic route to making a difference in this particularly thorny problem then I would be open to them investing and considering it social investment. I don’t think the moral hazard quite puts it out by default in other words.
A few things to highlight from all this.
First, when people try to make ethical decisions they can start from at least two very different starting points. Therefore attempting to reconcile all into a universal answer to impact investment decision making is not going to succeed.
Second, finding answers to complex social issues is not easy. Potential points of leverage and strategies are not straightforward or necessarily comfortable. Many of them transgress traditional red lines for foundations or social investors. They might involve private enterprise. They might be perceived as subsidising government. Someone might make a profit. My fear is that in their struggle to work through what to invest in, organisations start by putting these red lines in place. What this means in practice is that some of the most interesting potential answers will struggle to raise investment.