Pornography in your investment portfolio?
Many values-led organisations choose to screen out investments in what some might consider to be controversial activities such as alcohol, tobacco, gambling and pornography. If pornography is an area of concern, which factors should you take into account when managing your investment portfolio?
Pornography is often included on the list of issues excluded by investors, along with alcohol, tobacco, military and some other areas such as inappropriate marketing of breast-milk substitutes and animal testing.
If these areas are screened out by investors it is usualy on the basis of materiality (i.e. the amount of revenue generated by the controversial activity). They are often split in terms of corporate involvement in ‘production’ and ‘distribution’. However, pornography seems to be treated somewhat differently. Screens seem to be almost entirely concerned with the production of pornography and frequently ignore the issue of distribution. This begs the question, where would pornography be without any significant distributors?
Much of the pornography produced is often done so at the periphery of other mainstream business activities. for example, in the UK there are very few large listed companies directly implicated in the production of pornography to a significant level (i.e. more than 1% of overall turnover). This is in stark contrast to other areas, such as alcohol and tobacco. However, it would seem that the distribution of ‘adult entertainment’ services is an increasingly lucrative and popular business.
As technology advances, the channels over which ‘adult entertainment’ can be broadcast have increased. These have now moved beyond printed matter and DVDs towards internet provision, games consoles and distribution of pornographic material over mobile phones. For example, many mobile phone providers generate significant amounts of revenue from pornographic content in their ‘walled garden’ of content. This means that they promote the service themselves and make money from the content directly.
In many parts of the world there is an on-going debate as to whether parents should allow children to have access to the internet in their bedrooms instead of within common family space, to enable parents to keep an eye on the content that is being accessed/streamed on to their children’s computers. However, internet content is now accessible through games consoles and televisions, which could make the task of monitoring usage more challenging.
There is currently no tangible way in which internet content can be moderated by ISP’s (internet service providers). Indeed, some see the blocking of internet content as a civil liberty issue that should not be pursued. Internet regulators have recently approved plans to create a new adult-only internet domain (.xxx), which represents the first move to filter adult content. This suffix, however, is only voluntary at this stage.
Whilst content on television is regulated in the UK, and DVDs and films are subject to the British Board of Film classification, recent technology advances mean that internet content can now be broadcast online to internet-ready TVs. However, internet Protocol TV (IPTV) is not regulated by the communications regulator Ofcom.
So, what of pornographic content in investment portfolios? To include the distribution of pornography would mean looking at mobile telecoms companies and perhaps other sectors. Providers of IPTV technology may also be culpable. Taken to the very extreme, perhaps those that provide laptops and computers could also be excluded on the basis of their role in the distribution of pornography.
Fiduciary responsibility is a key component of investment management. On that basis a more pragmatic and balanced approach may be sensible, rather than simply ruling out everything that seems unacceptable.
It might therefore be logical to look at engaging with those companies within your portfolio which are involved in the distribution of pornography. For example, some investors have chosen to engage with mobile phone companies to encourage them to establish a system whereby customers can only access pornographic material on an ‘opt-in’ basis. Others have focussed on how pornographic content is offered via pay-per-view channels on hotel televisions.
There is no consensus as to the effect that pornographic content has on people. But there could almost certainly be more effective ways of protecting children and other vulnerable people from content than there are at the moment.
