Is it ethical?
For the investor
with a conscience
Ethical
investments: what are they?
Should your investments be in companies with little or no concern
for our environment, or would you prefer your investments to
be in a fund that is actively promoting a responsible attitude
to social, ethical and environmental issues?
Investments
houses have traditionally paid little or no attention to how
companies made their profits. Financial and economic performance
was paramount. This may suit many investors but there is now
a growing trend toward awareness in our environment and a wish
for socially responsible investment.
How did
this all begin?
Towards the end of the 1990's ethical investments really came
into their own. In 1983 the Ethical Investment Research Services
(EIRIS) was founded and set about researching companies' ethical
behaviour. Using this research the first ever UK Ethical Fund
was launched in 1984. It was predicted to capture an estimated
£500 million market size.
Investment
in this area is now the fastest growing market in the UK and
by March 2001 there were 55 ethical funds and a market size of
£3.3bn with over 456,000 investors. The first fund launched
now has over £1bn in ethical assets and most funds are
now using EIRIS research as a basis for their investments.
Consumers are
now making decisions based on social, ethical and environmental
issues rather than just price. Many companies sell and promote
ethical products alongside traditional products. World governments
realise that we need to be more socially responsible and are
looking to preserve our world, not exploit it.
What are
the advantages?
There is now a much wider range of long-standing ethical funds
with encouraging histories, either holding their their own or
in some cases superseding other funds, in various investment
sectors like UK, European, and Global. A wider range of ethical
investments is now available, such as Unit Trusts, I.S.A.s, Managed
Funds, Bonds and With Profit Bonds. Investments within a pension
fund can be included and you can choose different types of fund
in line with your attitude to risk: low risk deposit funds or
bonds, up to higher risk equity funds.
Like all other
investments they should be considered as a medium to longer-term
investment, that is, 5 years or more. The values of these funds
could fall as well as rise, and past performance is no guarantee
of future performance.
What does
"ethical" really mean?
Ethical funds can differ widely, but what does an "ethical
fund" actually invest in? Many funds use data provided by
EIRIS (the Ethical Investment Research Services) and some have
their own research committees. In general however, an ethical
fund manager will need to know a lot more about the companies
being invested in. This enables them to decide if a company meets
the particular fund's ethical criteria.
Most funds use positive and negative criteria in order to decide
which companies they will invest in. The criteria vary from fund
to fund but the following are examples:
| Negative Criteria |
Positive Criteria |
| Impact on people |
| Tobacco Production |
Education & Training |
| Pornography |
Healthcare Services |
| Oppressive regimes |
Open Policy Statements |
| Armaments |
Good Employee Relations |
| Gambling |
Equal Opportunities |
| Alcohol |
Community Involvement |
| |
|
Impact
on the Environment
|
| Greenhouse gases |
Energy Conservation |
| Nuclear Power |
Mass Transit |
| Road Builders |
Multimedia/telecommunications |
| Tropical Hardwood |
Pollution Control |
| Water Pollution |
Recycling |
| Mining |
Water Management |
| Pesticides |
|
| |
|
Impact
on Animals
|
| Animal Testing |
Benefit to Animals |
| Fur Trade |
Alternative Textiles |
| Genetic Engineering |
Vegetarian Foods |
| |
|
All companies
vary and no company can always be totally "pure". A
socially responsible fund can however claim to select those companies
which avoid the above negative criteria and embrace the positive.
In recognition
of the growing market interest and increased desire for Ethical
funds, the FTSE introduced the FTSE4Good in 2001 which tracks
the share prices of what it calls "socially responsible"
businesses in four separate sectors: UK, Europe, US and Global.
These companies are judged on environmental, human rights and
social issues.
According
to Lipper, the fund statistic group, the average UK Ethical Fund
has grown by 92% over the past five years compared to 87% for
the average UK All Companies Fund.
To find out more about the growing market of Ethical Investments
please click
here
or call 01268
762200 to
speak to one of our specialists. There is no obligation.
If you have
any questions or would like an adviser to call you (again without
any obligation) simply use our secure enquiry
form.
The value of
investments can fall as well as rise. Past performance is no
guarantee of future performance.
Lewkay
Financial Services
3c Sopwith Crescent, Hurricane Way, Wickford SS11 8YU * Tel:
01268 762200 * FAX: 01268 762292
Authorised and regulated by the Financial Services Authority
