Ethical Investing – Is Rental Property Better Than Shares?

Ethical investments are definitely becoming more popular these days – as they should! More people are aware that while investing in an index is generally the best way to go for the long term, most indices are going to include some companies that are involved in weapons manufacturing or tobacco products or have questionable human rights issues in somewhere in their supply chain or perhaps a poor environmental record.

It’s great that these kinds of investments are becoming more popular and I believe that as more people invest in these funds are companies realise that this is increasingly where their capital is going to be coming from in the future, the world is going to become a much better place. After all, to truly change the world we have to put our money where our mouth is, and ethical investing is a very easy and influential way to do that.

But say for argument’s sake that someone was really hard out and wanted to be sure their investment had the minimum possible negative impact on society. It’s nearly impossible to vet every supply chain of every company in an index to ensure there is absolutely nothing questionable about how everyone involved is being treated. Somewhere there’ll be a cleaner working three jobs to make ends meet or a factory with questionable practices. Is it possible that owning a rental property could be the most ethical investment this person could make?

Surely the best way to ensure an investment is as ethical as possible is to control it as much as possible. And what investment can you have more control over than a rental property? 100% ownership of your own business would probably be as close as you can get, which is what property investment essentially is anyway.

Now, elsewhere I have detailed my scepticism about the unhealthy obsession we have with property here in New Zealand. But we can probably separate that out for the moment because what I’m discussing here is landlords who are genuinely passionate about providing homes for people and if we had only those kind of property investors in NZ, we’d have a lot fewer property investors and therefore much lower house prices.

Property investment done with the best intentions is an opportunity to really make a difference in the world. You can choose deserving tenants in real need of a home. You can charge them fair rent. You can look after them, ensure their home is warm, dry and healthy, fit for their kids to live in and give them the best possible start in life. A well run rental property owned by a fair landlord would be a dream come true for so many tenants. The knowledge that all they have to do is pay their reasonable rent each week and not stress about what’s going to happen if something breaks or something major happens to the property must do wonders for their mental health.

If you really want to give people a leg up you can even run a rent-to-buy scheme and help them into home ownership! You can source supplies and labour from trusted providers who you know will look after your tenants and their own employees.

Now again, it’s not possible to cover every eventuality. A lightbulb bought in NZ probably has parts made in a questionable factory somewhere in the world. But by and large, property investment gives you a large degree of control and therefore an ability to operate in a highly ethical manner.

At the end of the day, what we need is both. We need a world full of ethically-run business creating products that won’t harm people, looking after their employees and our planet. And we need landlords who will treat tenants fairly and with respect and have a realistic view of their business that allows for proper maintenance and repairs rather than running properties into the ground. We’ll never have 100% home-ownership and that’s ok.

What do you think about the ethical ramifications of owning companies vs. investment properties? Have you dabbled in ethical investments? Let me know below 🙂

Comment Policy: For this blog, I’ve implemented a Comment with Kindness policy. You can read more about it here, but the gist of it is: Follow what I call the “Grandma Rule”. If you wouldn’t take that tone with your grandma, your comment probably won’t make it through moderation.

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