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Breaking Sustainable

“Say hello to my little friend” are some of the famous last words uttered by Miami coke dealer Tony Montana (Al Pachino) before he dies in a hail of bullets in the classic film Scarface.

In Pulp Fiction, hitman Vincent Vega (John Travolta) meets a similar fate when he mistakenly leaves a Mac-10 on the kitchen counter.

The bank robber in Point Break, Bohdi (Patrick Swayze), is forced to surf one last wave as the FBI encroaches on him.

What do these films convey to you? Yes, I am a product of the 80s and 90s! But the message is that all these characters pay a heavy price for their societal misdeeds.

I love TV shows and films where the protagonist is involved in a life of crime. I enjoy escaping into a world where I am forced to empathize with a deeply flawed character who continues to make bad life choices.

Breaking Bad is TV at its best—my wife and I actually binge-watched most of it while in Thailand on our honeymoon.

What can these characters teach us about investing? Each of these criminals has chosen an extremely unethical enterprise. The main characters have moments of elation and triumph, but they never lead to a happy ending.

Pop culture echoes the harsh reality of life, and if you look at publicly traded companies, you can make a similar argument: in the short run, companies with ethical dilemmas can be profitable and may look attractive on paper, but oftentimes, the extra baggage isn’t worth the additional risk.

The public may be slow to react, but once they realize that they have been lied to or that a company has violated their trust, the pitchforks ensue. Sustainable investing makes sense because the practice avoids the obvious bad apples while focusing on companies that are at least neutral or, ideally, benefit society positively.

Common sense tells you it’s not a great idea to invest in companies that have harmed a large number of people.

Since we touched on some prolific fictional drug dealers, let’s now talk about some real-life examples. A handful of pharmaceutical companies have been aggressively selling heroin to consumers for the past two decades.

Okay, it’s not exactly heroin, but it’s more or less a rebranded version of the drug. If you live in the US, you probably know someone who started taking a doctor-prescribed opioid and ended up in rehab or worse.

Drug overdoses now account for more deaths in the US than car accidents and guns combined. Last year alone, 62,000 Americans died from opioids—that’s more than from the Vietnam War and Iraq War combined.

Four out of every five new heroin users started with prescription drugs, according to the American Society of Addiction Medicine. Prescriptions for opioids have skyrocketed from 76 million in 1991 to over 207 million in 2013—enough to make Breaking Bad’s Walter White blush.

The companies peddling these drugs are now starting to face the consequences. Obviously, some people need these drugs for serious pain management, but it has come to light that these drug companies have vastly understated the risks of addiction.

If you’re suffering from minor back pain, is the relief an opioid offers worth the risk of getting addicted to an often deadly drug?

There are now ever-expanding civil lawsuits against the companies that have been aggressively marketing opioids to doctors based on flimsy studies regarding the dangers of addiction. As the tides turn against these companies, the lawsuits could be very costly and heavily weigh on stock prices.

A growing number of states and cities have already filed lawsuits against the five biggest opioid-producing pharmaceutical companies.

The Centers for Disease Control and Prevention estimates that the total "economic burden" of prescription opioid misuse alone in the United States amounts to $72 billion a year, including the costs of health care, lost productivity, addiction treatment, and criminal justice involvement. No one knows how this will end, but maybe you should sidestep these companies in your portfolio.

Another example of deceit comes from fossil fuel companies, who have been lying to the public for decades about climate change. A recent study has shown that the biggest domestic producer of oil, Exxon Mobil, has known since the 80s that its products greatly contribute to climate change, yet it has paid lobbying firms and scientists handsomely to instill public doubt.

Public opinion is quickly turning against the fossil fuel industry as people actually witness first-hand the effects of climate change.

If you’re a short-term trader, maybe you can turn a quick buck on some of these shady companies. But if you, like most people, are investing for the long term, it makes sense to invest your dollars elsewhere.

“To sustain” is defined as “to keep in existence, maintain, continue, or prolong”—why would you invest long-term dollars in any other way?

Negative externalities should come with a price. If you pollute the air I breathe or the water I drink, you should, at the very least, compensate me.

Or, if you knowingly deceive the public about the dangers of your product, you should pay the price. No one should get a free ride.

Concerned citizens and countries are now accounting for these externalities and accelerating the move to sustainable companies. Sustainable investing can actually give you an edge if you focus on it over the long run: studies have shown that sustainable investing has actually outperformed or kept up with other investments.

And performance aside, wouldn’t you rather feel good about what you’re investing in?

Breaking Bad’s name is fitting. The main character, Walter White, “breaks bad” by morphing from an upstanding high school science teacher into a ruthless meth dealer. The dark comedy spirals out of control as he chases short term profits and loses his moral compass. Sound familiar?

As investors, maybe it’s time we break sustainable instead.

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Disclaimer: This article is provided for general information and illustration purposes only. Nothing contained in the material constitutes tax advice, a recommendation for purchase or sale of any security, or investment advisory services. I encourage you to consult a financial planner, accountant, and/or legal counsel for advice specific to your situation. Reproduction of this material is prohibited without written permission from Patrick Dinan, and all rights are reserved.