Values-Based Investing Pork Test
Remove an investment when owning it violates a deeply held value
- Difficulty
- Easy
- Time to result
- ~days to results
- Steps
- 5
- Confidence
- 97%
The Pork Test distinguishes a deeply held value from a mild preference. Imagine advising an Orthodox Jew to eat cheaper pork and donate the savings to a synagogue. The suggestion is absurd because the objection concerns participation itself, not whether money can later compensate for it. Apply the same test to an investment: if owning a tobacco, fossil-fuel, weapons, or other objectionable company feels like violating a core value, exclude it and consciously accept the portfolio consequences. If ownership does not create that level of conflict, broad index investing combined with separate charitable giving may be more efficient. The method avoids prescribing one universal ESG portfolio. Instead, it clarifies the investor's moral threshold, separates authentic convictions from symbolic marketing, and makes the financial cost of alignment explicit.
Origin
Statman used the analogy while explaining why some investors reasonably accept lower returns to keep portfolios consistent with their values, while he personally holds broad index funds and makes separate donations.
Core principles
- 01Values can legitimately outweigh maximum expected wealth
- 02Portfolio exclusions should reflect genuine moral discomfort
- 03Investing choices and charitable giving may be separated when ownership feels acceptable
- 04The appropriate policy varies by investor
- 05Financial trade-offs should be acknowledged rather than hidden
How to run it
- 1
Specify the objection
Identify the precise company, industry, product, or behavior that conflicts with your values. Explain why ownership would matter to you personally.
Pro tip Use a written rule narrow enough to apply consistently.
Watch out Broad labels such as “bad companies” invite arbitrary and unstable exclusions.
- 2
Apply the participation test
Ask whether holding the investment feels like personally participating in or endorsing the objectionable activity. Compare that feeling with the pork analogy's direct moral conflict.
Pro tip Notice whether you would feel compelled to conceal the holding from a trusted member of your community.
Watch out Do not manufacture moral intensity merely because an exclusion is fashionable.
- 3
Test separation
Consider whether broad investing plus a targeted donation would satisfy your values. If that solution still feels fundamentally wrong, the conflict belongs inside portfolio construction.
Pro tip Compare how each option affects both impact and personal integrity.
Watch out A donation is not a universal moral offset and should not be presented as one.
- 4
Price the alignment
Estimate fees, taxes, diversification changes, tracking error, and possible underperformance from the exclusion. Decide whether you willingly accept those consequences.
Pro tip Use custom indexing or screened funds to implement exclusions systematically.
Watch out Never promise that values alignment will improve returns.
- 5
Codify and review
Record the exclusion rule and apply it consistently to future holdings. Revisit it when facts, products, or personal convictions materially change.
Pro tip Review the rule annually rather than reacting to every headline.
Watch out Frequent value-rule changes can become expensive performance chasing in moral language.
In the wild
An investor experiences ownership of fossil-fuel companies as a direct violation of environmental convictions. After estimating the tracking error from excluding them, she adopts a screened index and accepts that it may underperform. The decision is based on integrity rather than a claim that the exclusion guarantees superior returns.
→ Her portfolio reflects a clearly defined value with an acknowledged financial trade-off.
Statman describes his own alternative: he invests in general index funds and makes donations consistent with his values. Because holding the broad index does not trigger the same direct moral conflict for him, he separates efficient investing from philanthropic expression.
→ Values are pursued through donations without imposing personal exclusions on the portfolio.
Common mistakes
Assuming one screen fits everyone
Different investors experience different activities as morally unacceptable. A standardized label cannot replace personal value discovery.
Pretending alignment is free
Exclusions may increase fees, reduce diversification, or create tracking error. Those costs should be disclosed and consciously accepted.
Confusing provocation with conviction
Some products exist mainly to oppose another political tribe. A durable policy should arise from the investor's values, not from a desire to antagonize others.
Is it for you?
Best for
It is best for investors facing strong ethical, religious, environmental, or political objections to particular holdings.
Not ideal for
It is not ideal for casual preferences, trend-driven exclusions, or investors unwilling to accept possible tracking error and underperformance.
From the transcript
“there are people who are willing to give up wealth to be true to their values”
“if having fossil fuel or tobacco stocks in your portfolio feels like pork in the mouth of an Orthodox Jew, take them out of your…”
“But if not, then it is perfectly okay to separate the two.”
From the episode
Trust in Finance and Consumer Confidence With Meir Statman
Meir Statman