The idea of ethical investment may seem like the latest fad, but the concept has been around since the nineteenth century. Originating with religious leaders and high-minded reformers in the nineteenth century, it was the Methodist church that first planned their stockmarket investment strategy based on avoidance of 'undesirable' industries in the early 1900s.
This strategy became established across a number of churches and charities but it wasn't until 1971, when anti-Vietnam sentiment was at its peak, that the launch of the US-based Pax Fund opened up the strategy to individuals. Thirty five years later, thanks to climate change, fair trade and human rights issues, the retail ethical funds market is now worth a record £9 billion in the UK alone. (Source: EIRIS, as at Feb 2008. www.eiris.org)
Alcohol, tobacco and gambling have long been the most obvious taboo for investors, however, some also shun the shares of firms involved in weapons or war, companies which test their drugs on animals, and those seen to damage the environment as part of their business. Over the years, many different approaches have emerged and now even some mainstream fund managers take a positive approach to social responsibility and climate change, working with companies to improve their ethical profile and choose only those making a positive social or environmental contribution.
Ethical investment is not just a domestic affair. Researchers screen a wide range of companies from continental Europe, America and Asia, and it is therefore possible to assemble an international portfolio of equities based purely on social and ethical credentials. And it doesn't necessarily mean you have to sacrifice performance. Research by the Ethical Investment Research Service (www.eiris.org) shows that embracing social-responsibility can actually add value to your portfolio.
How much further can ethical investing go? Half a century ago investors would have been amazed at the lengths to which asset managers and their clients are prepared to go to reward good corporate behaviour. As the debate over global warming and other such topics evolves further, the investing public will become less tolerent of poor corporate behaviour and reflect this in their investment choices.
If you are keen to invest ethically, or would simply like some further information concerning ethical investing, please contact us.
Source: Marketing Hub - 01/10/2008