I went to speak at an event on social enterprise last week for a very nice organisation called LaunchMe. My brief was pretty simple. I was to speak for 10-15 minutes on the nature of social enterprise and then I was to interview TV celebrity Carol Smillie about her newish company Diary Dolls, which sells rather marvellous pants made at a manufacturing plant in Scotland that is a social enterprise.

Now what could be easier than that? Nothing – as long as you know what a social enterprise is. When I sat down to think about the matter, I realised I did not. Luckily, I have a pretty good contacts book. What, I asked them, is a social enterprise? Answers came there plenty, definitive answers came there none. Beyond the idea that it was a business – or sort of a business – that in some way did good, no one could really answer the question.

Can a social enterprise make a profit? Even at the dinner itself, one person told me yes and one person told me no. If it makes a profit does it have to give some away? Or is it not the profit but the nature of the business that makes it a social enterprise? If you employ homeless people but pay them the minimum wage and keep the profits in their entirety, are you a social enterprise? Or do you have to overpay the staff and donate to Shelter too? You get the idea. This is very tricky ground.

Everyone wants capitalism to make more people better off than not, for companies to act in the interest of society as a whole as well as for their shareholders. You’ve read this hundreds of times. But what is good and what is bad? I don’t often write about ethical funds on the basis that the lines are all far too blurred. If you are going to invest with ethics in mind you have to choose someone’s ethics to work with.

Take defence companies. They might be bad when their products are used in wars of which you disapprove – but what if you were to need defending very badly? Would you withhold your capital then? And what of tobacco companies? I think they are bad. But what if paying my grandmother’s care home fees rested on the need for high dividends sustainable over the medium term? I wonder if I might be budged from my position then. And what about companies that aren’t explicitly out to do good, but do it along the way?

I went to meet Will Smith, manager of the City Natural Resources High Yield Trust earlier in the week. His fund holds all sorts of companies I would imagine ethical investors wouldn’t fancy much. But he also told me about a recent investment in a small UK-listed firm called Plant Impact, which develops products that help to enhance the eventual yield from seeds. Higher yields mean a greater supply of food to the market, lower prices and then, presumably, fewer hungry people. Does that make Plant Impact a social impact business? It might even make City Natural Resources HYT a partial impact fund.

Moving away from the absolutely bad or not, there are companies that you could argue should get marks for improvement. If big oil invests a lot in renewable energy does that make them bad for being involved in fossil fuels – or good for pouring capital the rest of us don’t have into a greener future? Then there is Coca-Cola. Sure, it is peddling poison to the masses. But it has also been spending huge amounts of time and effort on useful things such as cutting its water usage (vital in much of the world these days). That’s a social good. Sort of.

You can see the problem. Once you start down the path of trying to be a morally superior investor, you are always a hypocrite– Merryn Somerset Webb

If you are going to choose ethics you might want to take religious fuzziness into account. If Islamic finance forbids interest payments, but there are very few listed companies that have no debt and do not pay or receive interest, is an Islamic finance compliant equity fund an oxymoron? Or not?

You can see the problem. Once you start down the path of trying to be a morally superior investor, you are always a hypocrite. Which is why you don’t read about this stuff much in this column.

However, there is a problem with my persistent refusal to engage with this attempt to make capitalism friendlier. It leaves me with a nagging sense that I could do a little better. I am, for example, a long-term fan of passive investing. But as First State’s David Gait pointed out to me this week, if we simply throw our money into the market to be invested in the stocks of every company in any index we are obviously neglecting our duty to society. There are some genuinely awful companies out there and if we don’t discriminate between the good and the bad how can we hope to encourage the bad to be better?

Mr Gait runs a group of what First State calls sustainability funds. The approach in these is not about red lines on good and bad, but about investing in companies that have the good governance, social and environmental polices in place to keep operating and paying good dividends to shareholders for decades to come. He wouldn’t buy Coca-Cola or tobacco companies, not because they are evil but because consumer habits (and legislation) are likely to mean their businesses aren’t sustainable in their current forms over the long term.

That seems entirely reasonable. But think about it a bit and you will see that it brings us right back to our usual mantra on investing: buy long-term growth at the right price.

Mr Gait phrases it well and First State practises what it preaches with exceptional skill, but what they are peddling is simply what should be recognised by everyone as good practice, long-term investing with a happy label. Nothing wrong with that. But it does suggest that investing in a way that is right for society is probably a matter of finding a good long-term, long-only fund run by an intelligent and trustworthy manager.

If he really is investing for the long term he will be automatically investing in sustainability. Mr Gait’s Worldwise Sustainability Fund is as good a place to start as any. The only caveat? I think it might be part of my own duty to society to point out that almost all stocks and markets are overvalued at the moment, so whatever you buy comes with more risk than usual.

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*Merryn Somerset Webb is editor-in-chief of MoneyWeek.