Michael
Donovan looks at
how to invest your money with a clear conscience
The bottom line of commerce is profit, but at what social and environmental cost? Our
well-meaning concern about the sorry state of the world contrasts with the fact that our
money, whether held in a bank or a more sophisticated investment, is funding much of what
we purport to oppose.
Ethical finance might at first appear to be a contradiction in terms but its rise mirrors
the popularity and mainstream acceptance of similar consumer campaigns once seen as the
domain of radical cranks. Who would have thought anti animal testing and vegetarianism
would end up with a high street presence in the form of The Body Shop and Linda
McCartney's meat-free sausages? Consumer and investor power really makes a difference -be
it for good or for bad.
The idea is a simple one. Let's say you disapprove of genetically modified food. You won't
buy or eat it, so why invest in it? (Of course, you may already be doing all three, albeit
unknowingly, which is another aspect of the same problem.)
By making a triple calculation combining economic, social and environmental concerns,
ethical investments make a good, honest profit in a transparent, accountable manner. The
usual array of financial products, good service and a reasonable return on savings is
combined with a moral agenda that precludes funding dubious fields of business such as the
arms industry, nuclear power, environment- and animal-unfriendly industries, certain types
of chemical and fuel production, tobacco products and companies with a poor record of
employee relations.
In 1999 the US Social Investment Forum reported that ethically oriented investments in the
US accounted for $2.1 trillion. This represents over 13% of all professionally-managed
money in America. In the UK 30 companies manage some 2.6 billion pounds through 70
different funds.
There is an ethical alternative to nearly every financial service, from life insurance to
pension plans. The British market is set to increase further with a change in the law
effective July 3 informing pension holders about the ethical stance of their pension
funds. These funds control a third of the UK stock market, potentially wielding a powerful
influence on business practices.
A logical step beyond boycotting negative industry is positively promoting areas of
constructive and sustainable growth. Social sentiment puts your money to work in the most
mutually beneficial form, but the crux of the dilemma is whether it's possible to keep a
good conscience and get a good return.
The initial reaction to this is that such investments, though worthy, must be
unprofitable. This is a common misconception as is the skepticism about the range and
quality of services on offer.
Returns from ethically placed investments can equal or exceed regular investments. Of
course they are subject to the same risks as all financial dealings -they are not fail
proof -so the same cautions apply. However, this side of the industry innately inspires
more confidence in the integrity of its dealings.
Companies operate to the highest professional standards and enjoy a cleaner record,
untainted by the scandals that have dogged many major players. Investments in sustainable,
socially-kind goods and services are not as susceptible to the capital flight associated
with cash invested to simply turn a profit. Money that flees when a profit is realized or
is potential threatened is a contributing factor to roller coaster fluctuations in stocks
and currencies across the globe.
Furthermore, the social cost of this form of speculation is enormous. Dubbed the
"race to the bottom," corporations and governments lower or resist introduction
of labor and environmental standards to increase "competitiveness" and companies
relocate if local standards rise. It is an unfortunate fact that this pattern has made
some of the worst regimes the best investment opportunities and some of the worst
employers the most profitable.
Social Investment Forum (UK) www.uksif.org
UK Social Investment Forum, Holywell Centre, 1 Phipp Street, London, EC2A 4PS, UK. Tel:
+44-20-7749-4880. Fax: +44-20-7749-4881.
A national, non-profit-making, membership association, comprised of investment
practitioners and institutions from across all fields of business. Lots of information and
links.
Ethical Investment Research Service www.eiris.org
The Ethical Investment Research Service (EIRIS) was set up in 1983 with the help of
churches and charities which had investments and needed a research organization to help
them put their principles into practice.
Triodos Bank www.triodos.co.uk
Brunel House, 11 The Promenade, Clifton, Bristol, BS8 3NN, UK. Tel: +44-117-973-9339. Fax:
+44-117-973-9303.
With offices in Holland, Belgium and the UK, Triodos is internationally-active financing
businesses which invests in projects that are socially, ecologically and financially
sustainable. Services include savings and checking accounts and investment funds.
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