Harvard psychologist Steven Pinker has a fascinating idea: People get nicer over time.
Throughout history most societies have become more peaceful and compassionate, more cooperative and tolerant. War, violent crime, discrimination, and tyranny have all plunged over time. It's "the most important thing that has ever happened in human history," Pinker writes.
You can see the trend hitting financial markets with the growth of socially responsible investing.
Mutual funds investing in socially responsible companies – those passing a screen of environmental, social, and governance tests – have exploded from $641 billion in assets in 2012 to nearly $2 trillion in 2014.
Image source: Getty Images.
It's one of the biggest trends in investing. Investors don't just want a high return. They want to feel good about investing in socially responsible companies.
But there's a problem: Everyone has a different definition of what's socially responsible.
Take a look at some of the companies in Vanguard's FTSE Social Index fund. This is supposed to be a professionally curated list of America's most responsible companies:
Bank of America, which has paid $74.58 billion in fines – more than any other company in history -- for its role in blowing up the financial system.
McDonald's, ground zero for paying poverty wages and selling some of the unhealthiest food money can buy.
Pepsi, purveyor of sugar water when one-third of adults are obese. As one study recently found, "sugary drinks kill as many as 184,000 adults each year."
JPMorgan Chase, which has paid $27 billion in fines for systematically screwing homeowners and rigging currency markets.
Herbalife, which has spent the last two years trying to convince investors and regulators that it's not a pyramid scheme.
Ameriprise Financial, whose Wikipedia page has an entire section on "criticism & controversy" outlining the number of times it's been fined for conflicts of interest.
Moody's, which gave perfect ratings to subprime mortgage securities that smashed the global economy.
Tyson Foods, which was caught bribing meat inspectors and has been the target of countless animal cruelty investigations.
UnitedHealth Group, which was called before Congress to explain the practice of rescinding insurance after customers get sick.
Citigroup, famous for inept management and requiring one of the largest government bailouts of all time, plus your standard multi-billion-dollar settlement for destroying the housing market.
Mondelez, who just a few months ago was sued for manipulating the wheat market.
The Forum for Sustainable and Responsible Investment says "there is no single term to describe" what socially responsible investing is. But excluding a company that has paid more fines for its social indiscretions than any other business in history seems like a good start.
Of course, no company is perfect. All of these businesses are run by decent people trying to do well despite an occasional slipup.
But that's also true for big oil companies, which are portrayed as the antithesis of a socially responsible company. BP caused an oil spill that splashed millions of barrels of oil across the gulf. That's terrible. But it also supplies cheap oil that everyone reading this article relies on to keep society running smoothly, which is great. Fracking isn't good for the environment. That's a social cost. But it also creates tens of thousands of high-paying jobs in economically impoverished areas. That's a social benefit.
No company is purely good or purely evil, and every investor filters with their own definition of what's socially responsible. That's fine – I do it too. If it helps you sleep at night, it's a win.
But realize that everyone's own definition is biased and selective. Nothing's black and white, and even measuring shades of grey is less objective than it looks.
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