Ethics: What Aristotle has to do with investing money

Today more than ever, investing is also about achieving an overarching purpose and doing good. Impact investing is the expression of this attitude. Ethics is the keyword. The basis for this can already be found in ancient times with Aristotle.

From Prof. Dr. Patrick PetersProfessor of PR, Communication and Digital Media and Vice-Rector for Teaching Material Development at the Allensbach University

The "Nicomachean Ethics" is considered the most important ethical writing by the ancient philosopher Aristotle and is also the oldest scientific ethics in Europe. In the "Nicomachean Ethics", Aristotle creates a basis for a discussion whose importance is growing. He developed the concept of eudaimonia as a core concept of ancient philosophy. The term goes back to the ancient Greek "εὐδαιμονία", which means "of good spirit". Accordingly, eudaimonia is simply translated as "happiness". Plato (Socrates' pupil and Aristotle's teacher) already regarded eudaimonia as the perfect, absolute good.

In his "Nicomachean Ethics", Aristotle formulates eudaimonia as the highest good for a human being. The ultimate goal is therefore the attainment of the actual good, which stands at the pinnacle of all goods. The main task of philosophical ethics is therefore to determine what the highest good is. Specifically, Aristotle states: "Every technique and every method, likewise every action and every project, seems to aim at some good; therefore the good has been aptly described as that towards which everything aims." ("Nicomachean Ethics" I 1, 1094a)

Ethics: The good is a unifying, overriding principle

It is generally accepted that ethics establishes criteria for good and bad actions and for the evaluation of their motives and consequences and deals with the three questions of the "highest good", the right action in certain situations and the freedom of the will. Aristotle's concept of eudaimonia is particularly helpful when it comes to the question of the "highest good". The good is a unifying, overarching principle that does not become entangled in details and cannot be understood only in fragments. Anyone who really wants to be good must recognize this as a global goal. It is not enough to be good temporarily. Being good is the higher purpose and goal of existence.

Aristotle therefore recognizes certain basic conditions in order to be able to comply with the action maxim of the lasting good deed. The good can only take place in genuine actions, which in turn are predetermined by the possibility of having the necessary means available. Generosity presupposes the possession of financial means: eudaimonia, happiness, is pursued for its own sake. All other goods are only needed to achieve this goal. Eudaimonia is therefore the perfect and self-sufficient good. It is the ultimate goal of action and the "most desirable of all, in such a way that nothing more can be added to it" ("Nicomachean Ethics" I 5, 1097b).

This shows that wealth cannot be an expression of eudaimonia. Because wealth is always expandable. Eudaimonia is not. It cannot be multiplied and forms the crown of creation, so to speak. And yet eudaimonia and prosperity are closely linked. It can only be achieved if the economic basis is secure. Those who suffer financial hardship cannot turn their full attention to the good, as they have to fight for their own existence.

Ensuring sustainable development

This offers an interesting transition to the investment landscape. What added value can Aristotle provide? If you see eudaimonia as the highest good for a person, it is easy to recognize the connection to impact investing. As is well known, this refers to a form of investing that has a real and measurable positive impact on people, society and nature and leads the investor to a higher goal through the provision of capital.

In the world of finance, there is often talk of ethical, sustainable, ecological and socially responsible investment. This in turn refers strongly to the Sustainable Development Goals (SDG, "17 goals for sustainable development"). These criteria define the areas in which investors can engage sustainably. The "17 Sustainable Development Goals" are political objectives of the United Nations (UN) that are intended to ensure sustainable development at an economic, social and ecological level worldwide and thus have a decidedly ethical level. However, investment projects can only be sustainable if they are also financially viable and profitable, so that they are economically viable in the long term.

Ethics: Investors can achieve an individual state of happiness

This also applies to impact investing. This investment philosophy is about a sensible and contemporary form of investing, for which the positive and sustainable impact on society as a whole always counts in addition to the usual financial return for the individual. Ethics and investment success must therefore form a unit. In this respect, impact investing should not be viewed purely in terms of 'ethical returns'. This is important in order to really understand this investment philosophy.

Investors who focus their investments on overriding principles such as the pursuit of the greater good (i.e. eudaimonia) promote their personal ethics and individual development. They thus achieve an individual state of happiness far above the everyday level. By promoting an overarching social and/or ecological purpose, an investment oriented towards the overarching principle of happiness in the sense of impact investing leads to a feeling of happiness and establishes eudaimonia in the sense of Aristotle's virtue ethics.

At Allensbach University you will learn ethics in business in the Master's degree in Business Education (M.A.) and everything to do with modern investment in the Master Finance (M.A.) in equal measure!