TC BUSINESS
Principles
or profit?
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Illustration by
Yukiko Leitch |
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Ask yourself two
questions: "Do I care about the problems of the world?" and "Do I want to
invest in companies that make a positive contribution to society rather than those that
harm the world or its inhabitants?"
Chances are, you' say "yes" to both. Unfortunately, through their investments
many people may inadvertently support practices that they would find objectionable:
pacifists may support the arms trade, conservationists may contribute to environmental
destruction, conscientious people may support oppression and exploitation, nonsmokers may
help the tobacco industry, and vegetarians may invest in factory farming.
To avoid sacrificing profits for principles, you can invest in "ethical investment
funds." To get a better understanding of how they work, I spoke to Nick Griffin from
Friends Provident International, a pioneer of ethical investment funds. Friends Provident
launched their "Stewardship Fund" in 1984, and it now manages in excess of EP1
billion.
 What exactly is ethical
investment?
Put simply, ethical investment seeks to invest in companies that make a positive
contribution to the world and seeks to avoid companies that harm the planet, its people or
its wildlife. Very few of us would object to these principles and indeed it could be
argued that many of us would be ethical investors if only we knew such funds existed and
that they perform very well.
What are some reasons for
investing in a particular company?
Conservation of energy or natural resources, environmental improvements or
pollution control, high employee welfare standards, a good equal opportunities record, or
openness about their activities.
What about reasons for not
investing in a company?
Environmental destruction, unnecessary exploitation of animals, trade with
oppressive regimes, weapons manufacture, pornography, tobacco or alcohol production,
nuclear power, gambling, or offensive advertising.
Isn't this very restrictive
for the fund managers?
It is certainly the case that many of the largest companies tend to be excluded
due to their diverse range of activities; nevertheless, there are still more than 500
companies on our approved list. The fact that the Stewardship Fund managers are currently
investing in fewer than 160 of them demonstrates that they still have plenty of scope to
exercise their own judgment and expertise in the day-to-day management of the funds.
Because of the screening criteria, most investments tend to be in smaller and medium-sized
companies. However, we have discovered that companies that fit the criteria are often
found at the leading edge of growth industries and are therefore most likely to benefit
from developing trends and do better in the long run. These investments are complemented
by a select band of larger companies, such as Marks and Spencer, that figure among the
UK's most successful and profitable companies.
How have ethical funds
performed?
There is strong evidence that an ethical investment policy need not damage
investment returns. UK based Stewardship Unit Trust has averaged 12.3 percent per annum
growth since it was launched in June 1984.
How can one become an
ethical investor?
It is possible to make regular contributions into ethical offshore funds via a
personalized pension, life insurance or savings plan. Ethical funds may also be
incorporated into a diversified lump sum investment portfolio. Many parents, grandparents
and godparents have chosen ethical funds as a way of investing in a better world for their
children's future.
Kenji Steven is a consultant at Stirling Macguire Asset Management
(Japan) Ltd. |
