Ethical Investing is becoming something of a growth phenomenon – from very much a niche area it has surged in recent times.
But ethical investment is not new.
It had an important role in ending the apartheid government in South Africa while since the late 1990s it has been driven in part by fears over climate change.
Yet many may not appreciate that it goes far further back in its origins.
Indeed right back to the 18th century when Quakers and others banned participation in the slave trade.
John Wesley (1703–1791), founder of Methodism, was an advocate. Wesley’s sermon “The Use of Money” outlined his basic tenets of social investing – not to harm your neighbour through your business practices and to avoid industries which damaged the health of workers.
Campaigners of the time, often religiously motivated, urged the avoidance of “sinful” companies, such as those associated with guns, liquor, and tobacco. Specialist investor EdenTree still has strong links to the church. Proclaiming profit with principles, it is a subsidiary of Ecclesiastical Insurance Group and wholly owned by Allchurches Trust.
These days the list of beyond the pale activities is huge.
The likes of alcohol, tobacco, slavery and weapons are still there but so too are fast food, gambling, pornography, abortion, fossil fuel production, fracking, and irresponsible advertising and marketing.
There is far more concern, particularly among the young, regards biodiversity, environmental management, waste, the use of natural resources, human rights, labour standards, child labour, equal opportunities, obesity, company board structures, executive remuneration, and the avoidance of bribery and corruption.
Yet ethical investment now goes far beyond negative screening – avoiding companies with poor practices or impacts.
There is a growing emphasis on fund managers seeking out companies with positive environmental, social and corporate governance (ESG) policies.
Amanda Young, head of responsible investment at Standard Life Investments, said: “We’ve seen a shift away from ‘thou shalt not invest in X’. Investors want to know companies are contributing positively to the environment and their employees, and have products that make the world a better place.”
The sector, which started out with just a handful of funds marketing themselves as green or ethical, like Friends Provident Stewardship, NPI Global Care (now run by Henderson) and Jupiter Ecology, has evolved and diversified into a rapidly growing range of options, where ‘ethics’ may or may not play a major role – sustainability themed funds, negative ethical funds, faith-based funds, environmentally themed funds and many others.
Green and ethical investment has been embraced by pension funds, insurance companies and ISAs – perhaps unsurprising given a 2015 Good Money Week survey which found that almost two-thirds of British investors would like to be offered a sustainable and ethical option when choosing investments.
Tanya Pein, director of the UK Sustainable and Investment Finance Association, said: “It’s a market that has grown enormously over the past decade. In 2007 the independent research organisation EIRIS calculated the green and ethical retail fund market to be worth around £8.9 billion, and it’s remarkable that a similar calculation last year found the UK market now closer to £1.5 trillion.”
Thomas and Thomas Financial Services is an example. It has seen such a demand to switch into ethical investment that nearly £7 million of client assets have been moved across, over a sixth of the total client bank.
And the general pattern shows no sign of reversing given causes such US President Donald Trump’s negative attitude towards environmental agreements, the vast amount of plastic in the ocean, and on-going corporate greed and unfairness.
Not exactly the Age of Ethical Investment, but the trend is definitely there.