Ethical investments can help the third world and the animal kingdom. John Fleetwood reports
MONEY: foe or... FOE? Forgive the pun, but is our money a friend of the bank, and not a Friend of the Earth?
Most of us invest our money in a bank, building society, insurance company, pension fund or investment compasy. They in their turn invest our funds in companies that aim to make a profit regardless of their involvement in the arms trade, factory farming, environmental destruction or repressive regimes.
There is an alternative. As consumers we do have the power to determine the policies of those companies from whom we buy. Yet how often do we consider the ethics of the financial institutions to whom we give our business? Even the Pensions Trust, which manages the funds over 1,400 charities in the UK, invests with scant regard for ethics.
The remarkable success of recent consumer led campaigns to halt drift-netting of tuna, the Barclay's boycott over South Africa and the greening of the supermarkets has shown the real influence which we can bring to bear in a "free" market. If this power were used to its full potential, every company would have to account for its business practices, in order to satisfy the concerns of its customers.
Major firms generally rely on the stockmarket to finance their activities, and are therefore dependent upon the support of their investors. Contrary to popular opinion, these investors are not just faceless institutions or multimillionaires. They are you and me.
Through our mortgage, pension schemes or savings we indirectly invest in the stockmarket by means of "pooled" funds, which use the combined capital of individual investors in a balanced portfolio of 50-200 companies. This significantly reduces the risk attached to direct investment in individual shares, but has led to the support of companies which we would have otherwise wished to avoid.
Before 1984, there was no easy means by which a UK resident could register his or her disapproval of an investment company's policy. In April of that year however, an insurance company, founded on Quaker principles, launched a revolutionary fund which was vetted on social, moral and environmental criteria. Since then, a further 20 "ethical" or "green" funds have been launched in the UK, as growing environmental awareness has highlighted public concern over these issues.
Environmental funds operate on a positive basis with ethical criteria being applied. Thus companies are sought whose activities contribute to environmental improvement by waste management, pollution control, or production of "clean" energy, for example.
In some cases, investment managers are given a free rein, but usually some form of committee advises the fund controller on the acceptability of investments. The degree of independence and influence of this committee varies, but in many cases this is indeed an independent advisory body, comprising notable persons with expertise in a variety of social and environmental areas.
So, how efficiently is the vetting process carried out? Once again considerable variance between individual funds is evident. A good guide-line is to look at the number of stocks on the "buy list" (the fewer, the better) and the ethics of the investment company itself.
There are no hard and fast rules, but a company's commitment to its stated policies should not be in doubt if the investor is to place confidence and money in that company.
Further information from John Fleetwood, Kingswood Consultants, 68 Sheep Street, Birester, 0.ron 0X6 7I,D Tel: (0869)252545.