As a white, 30-something woman who only recently started to save for retirement, I felt late to investing when I opened my first Etrade.com account in August 2020. I deposited some money and started exploring my options. But apart from a few sectors that I’d decided to rule out — fossil fuels, weapons, and mining — I wasn’t sure how to approach investing from an ethical perspective. Investing for investing’s sake might improve my finances, but if the unintended side effects are climate change, war, and colonization, I’m not exactly sold on the idea.

There are more investing options than ever for people like me, who want to improve the impact of their investments. Public corporations are reporting on their environmental, social, and governance (ESG) impacts each year, as investors increasingly see these metrics as a selling point. But there’s at least one ethical concern of mine that largely remains an outlier: racial inequality. For example, according to the University of Minnesota, 92.6% of all Fortune 500 companies have CEOs who are white, and only 1% have CEOs who are Black. This makes it extremely hard to include anti-racism as an investing criterion.

One of the investment funds I initially considered was Beyond Investing’s US Vegan Climate exchange traded fund (ETF), bought and sold under the ticker, “VEGN.” You can invest in ETFs in a stock exchange the same way you buy and sell individual stocks, at a relatively low share price. The difference is that ETFs track an index, which is a grouping of stocks, commodities, and bonds determined by an investment company. I liked the idea of investing in ETFs because they have lower risk than individual stocks, as a basket of diversified stocks. But as I did my research, I soon realized this fund wasn’t quite as uniquely “vegan,” as I’d expected.

VEGN is marketed as the world’s first vegan investment product, allowing you to invest without supporting companies that directly harm animals. Beyond Investing’s founder, Claire Smith, says “people can be activist[s]” by investing in VEGN in their retirement funds. I’m not vegan, but a climatarian: I refrain from eating meat to minimize the greenhouse gas emissions of my diet. But the branding worked for me. The idea of a “cruelty-free” investing option sounded like it might cover most of my concerns. I decided to invest in some shares, which were selling for around US$30 at the time.

I’d expected a group of companies selling vegan products, but the VEGN fund is not that different from the S&P 500’s exchange traded fund.

I’d expected a thematic group of companies selling vegan labeled products, but the VEGN ETF is not that different from the S&P 500’s ETF (SPY), which tracks an index of 501 top-valued US companies. The main difference is that VEGN negatively screens (or excludes from the index) companies based on certain criteria.

Companies are excluded if they earn too much (generally more than 2% of their revenues) from activities that involve animal exploitation — in testing, research, the production of food or other commodities, or use in sport or recreation. VEGN also applies veganism’s guiding principle of doing no harm by excluding military suppliers, weapons manufacturers, and tobacco companies. And it considers major contributions to climate change a deal-breaker, because these activities destroy animal habitats. “We’re conscious of animal exploitation in its broadest form, not just… killing them to eat them,” says Smith.

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In other words, its negative screening rules more or less matched my own initial criteria, except for anti-racism. When talking to anti-racist vegan scholar and diversity, equity, and inclusion consultant Dr. A. Breeze Harper, I realized this is not uncommon among products marketed toward ethical consumers.

“It’s important to question the efficacy of green capitalism, as it still isn’t really yielding equitable and inclusive results for the most marginalized [people],” she says. Harper advocates for a broader interpretation of a vegan cruelty-free ethics, emphasizing that marginalized people can be exploited in the food system and other value chains as much as animals — if not more.

Smith, who is white, also acknowledges the importance vegans place on minimizing harm to humans. The US Vegan Climate Index does screen companies for weapons and child labor. And Smith argues that positive social and environmental activities are mutually beneficial, so solving for one solves for the other variable as well. But without rules on social inequalities, it’s debatable whether Beyond Investing is actually helping the world become more cruelty-free for people from all backgrounds.

What are the cute replacements for giving up white financial privilege?

For Harper, even if an investing product divests from companies exploiting animals, it still applies the logic of capitalism, which upholds inequalities across race and class. “Being vegan is far easier than actually being actively anti-racist and questioning capitalism, because at least when you’re vegan, there’s cute replacements for cow cheese and cow meat,” she says. “What are the cute replacements for giving up white financial privilege?” For her, the idea of “vegan investing” combines two spaces heavily steeped in white middle-class bias.

Hearing this gave me a chance to check my own privilege. Why had I assumed it would be ok if only three of four of my criteria were satisfied?

Some of the companies in the VEGN index include Tesla, Apple, Mastercard, Visa, Microsoft, and Alphabet, Google’s parent company. The stocks of these and other large cap companies — those valued at more than US$10 billion — make up the largest slices of the index’s pie by percentage. Then Beyond Investing brings in mid-cap companies, which are valued between US$2–10 billion, but this accounts for just 2.5% of the batch.

Yet, many of the largest corporations listed in VEGN’s index, Harper points out, have major racial disparities in their workforces. “Every year a report comes out, and these top companies like Google and Facebook are still struggling with racial equity and anti-racism as it plays out in how they hire, how they recruit, how they retain.”

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While ethical investing frameworks use metrics from diversity and inclusion reports to evaluate businesses, these statistics leave out critical systemic issues, including how or why marginalized groups of people lack access to wealth.

“White people have ten times the wealth of black people,” says Harper. This gap is the result of “four or five hundred years of systemic racism, and the wealth and resources accumulated starting with antebellum slavery,” as well as systemic discrimination in employment practices, housing, and education. The resulting racial wealth gap influences “who is more likely to invest and have higher literacies around why one should invest,” she explains.

In theory, impact investment platforms like Beyond Investing have a framework capable of addressing issues of racial inequality. Companies already use ESG reports to respond to the growing interest of consumers in evaluating companies based on the “triple bottom line” of people, planet, and profit in their investment and purchasing decisions. Beyond Investing uses data from major companies’ ESG reports to determine whether they meet its screening criteria for its Vegan and Climate Index.

In theory, impact investment platforms have a framework capable of addressing issues of racial inequality.

But people like Harper, who understand the historical dimensions of racism and poverty, are still skeptical about the methods used to report ESG-related business performance. She feels they can give a “sanitized picture” of ethical dilemmas. And this suspicion is not unfounded. It has prompted the EU to develop new rules against corporate greenwashing in financial products that claim to meet certain ESG standards, and the US Securities and Exchange Commission has created a task force on climate and ESG-related disclosures.

With most of the ethical emphasis being placed on climate change, racial inequality continues to lack the attention of mainstream, white, middle-class investors. The solution, for Harper, is actively centering anti-racist vegan ethics and the needs of “the most marginalized and vulnerable [people] who will be deeply and negatively impacted if ethics are not adhered to.”

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When consulting with businesses through her company, Critical Diversity Solutions, Harper champions a “holistic” set of ethical principles. These include access and inclusion throughout a company for people marginalized due to race, class, gender, and/or ability. It’s also important to examine an organization’s decision-making, recruiting, worker protections, and even investments and property ownership.

Beyond Investing has a long way to go in terms of addressing the full extent of these issues. Yet it has made some strides toward diversity as a partly female-led and all-vegan team of principals.

“At least one of us has experience of living in poverty,” Smith says. Whether or not the company will address racial inequalities in its vegan investment principles depends on its stakeholders. “Were it to be considered necessary or important by our investors, we could put in place a board to include a wider variety of viewpoints,” she adds.

Investing presents an odd double bind for people on the losing side of the economy, which is most of us.

Examining vegan investing as an ethical option made me realize that my initial impulse to exclude certain businesses or industries won’t change underlying structures of inequality. Investing presents an odd double bind for people on the losing side of the economy, which is most of us. You may feel at once a desire to save and minimize your future economic risk or even overcome economic adversity, while realizing that you’re promoting and perpetuating the system of inequalities you’ve also suffered from. And I, at least, know that any suffering I’ve felt from economic inequality is only a fraction of what others with marginalized identities have gone through.

I’ve continued to experiment with investment strategies including diversification, and I now invest thematically and at my own risk in the individual stocks of smaller companies improving climate resilience and racial equality. As long as the capitalism that produced systems of slavery and colonization dominates the economy, I’m not convinced the words “ethical” and “investing” belong in the same sentence.

The complicity of investing is a challenging ethical dilemma, which is why I’m still waffling about my investing decisions. Knowing the insignificant scale of my investments also makes the whole exercise feel like mental gymnastics. But I think what’s important is not how we invest in stocks, but how we invest our time and energy into the spaces where we have real influence: our voices, our work, and our communities.