A:

A number of aspects are factored for ethical investors considering the drug sector, such as animal testing or the type of drug being manufactured. Ultimately, ethical investing comes down to the moral and ethical beliefs of the individual investor.

Companies that manufacture drugs are part of the health care sector. While companies responsible for producing birth control or morning-after pills may not be a suitable investment for an ethical investor who is devoutly Catholic, for example, other companies may be appropriate. It is especially important for ethical investors to research a specific company before investing to determine if the company operates within the investor's religious or ethical boundaries. For ethical investors, determining the ethical guidelines by which a company operates is an essential part of their equity valuation.

Ethical investing is the use of an investor's ethical principles as the main navigational tool when seeking out potential investments. Investors with a rigid set of principles may choose to steer clear of the pharmaceutical industry entirely. However, companies that produce natural supplements or drugs that aid in combating diseases such as Alzheimer's or cancer may not conflict with the investor’s beliefs.

In the financial world, ethical investing and socially conscious or socially responsible investing are used interchangeably. However, a socially responsible investment is arrived at by using a standard and broader set of guidelines, where ethical investments commonly involve a greater degree of individuality when selecting securities.

Websites and screening tools are available to aid the ethical or socially responsible investor in portfolio management. The American Customer Satisfaction Index and the Global Reporting Initiative list companies that are financially sound, have a high rating in customer satisfaction, and are environmentally and ethically friendly. The Calvert Social Index lists, by market capitalization, the 1,000 largest companies in the United States, then narrows the list by evaluating the companies in different areas such as government, ethics, product safety and impact. Investors could also start looking at companies that make up socially responsible or ethically minded mutual funds or ETFs.

As with any type of investing, there are benefits and drawbacks for the ethical investor. For individuals who live by a certain moral code or standard, investing that follows suit seems like a logical step. There are also emotional perks. Companies that fall in line with an individual investor's personal beliefs and that also perform well in the market provide emotional reassurance as well as financial benefits.

Ethical investing can pose challenges for investors, as investments that meet an investor's personal criteria perfectly can be difficult to find. Ethical investors may face difficult decisions involving some type of compromise to their principles, particularly if those principles are strict. Ethical investors are likely to spend a significant amount of time and energy locating investment opportunities that line up satisfactorily with their standards.

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