Articles (updated 1/06/08)

    LOOKING FORWARD – THE FUTURE OF ETHICAL INVESTING              

This was a meeting organised as part of National Ethical Investment Week by Barchester Green Investment, specialists in ethical and environmental funds.

First some history and facts. In 1988 “Stewardship” launched a unit trust with 10,000 unit holders and EIRIS (Ethical Investment Research Services) was the only authority covering ethical investments. Few civil society campaigns, other than anti apartheid used the capital market. Now funds are provided by many different companies and in 2005 over one trillion euros were invested in socially responsible investments. Now it is about 5 to 10 times higher and even big finance companies have been looking at these issues. It is the exception now for companies not to produce a CSR (corporate social responsibility) report, however often transparency is not so good. Putting pressure on companies sometimes causes them to be less transparent. The challenge is on performance using appropriate benchmarks although unfortunately so far no benchmarks are tied to the Millennium Goals. Over 30 NGOs now use investments to challenge companies, sometimes with good results (e.g. GlaxoSmithCline have given access to anti-retrovirals for poor countries).

A second speaker was rather pessimistic, pointing to the proposed extraction of oil from tar sands under the rain forest in the Congo, conflicts over resources (bio fuels vs. food vs. forests and corruption involved in access to resources in Africa. Many companies are finding ways to cut costs and hold CSR at rather low value and CSR is not always so important to stakeholders. These turbulent times can be very important for investors but will CSR be taken into account?

A speaker from EIRIS was more optimistic. He felt that consumers are more aware of the linkages around purchasing and increasing numbers are concerned about what they do with their money and about how their pension schemes are invested.  Islamic finance too is a huge movement with a focus not only on Islamic norms for finance but taking ecology into account. NGOs are using investments as part of their campaigns and there are now many opportunities, not only in this country but in other parts of the world also. However it is often difficult to get information and also to overcome the basic scepticism as whether it will make any difference. His question – is there a gap between what the city sees as financial but what we see as sustainable?

The head of investment banking at Triodos bank gave a rather different picture from a successful organisation in which all investments are ethical. They invest directly in schemes such as wind farms, sustainable housing and micro credit for people in poor countries. The challenge is to connect people with the real drivers for a long term future. 

The big question – how can financial organisations influence investors when mainstream investors and mostly not interested in SRI giving the stock answer that ethical funds have poor returns.

Daphne Norden