History of ethical investing

Today, there are all sorts of technical terms for investment approaches that seek to bring personal values to bear on financial decisions. For example, ethical investing, responsible investing and environmental, social and governance (ESG) investing. The longest standing such term is perhaps ‘ethical investment’. Dating back to the nineteenth century, the roots of ethical investment can be found among religious movements including the Quakers and Methodists, whose concerns included issues such as temperance and fair employment conditions.

A hundred years ago - the start of ethical investing?

At the beginning of the 1900s, the Methodist Church in North America decided to invest in the stock market, having previously viewed such practice as a form of gambling. However, their decision came with a proviso: they wished to exclude certain types of companies, specifically those involved in alcohol or gambling. The Quakers soon followed their example and were especially keen to avoid weapons manufacture.

Public demand for ethical investment vehicles took off in America with the launch of the Pax Fund in 1971, as a reaction to the Vietnam War. Discontent caused by the war had led some investors to question how their money was being used. Many were particularly angry with the manufacturers of Agent Orange, the defoliant sprayed on Vietnamese jungles, which caused deformations in the babies of people who came into contact with it.

Ethical investment in the UK

The history of ethical investment in the UK goes back to the late 1960s and early 1970s, when a number of groups were exploring the possibilities for this type of investment fund. One of the individuals involved was Charles Jacob, then an investment manager with the Methodist Church. He prepared a proposal for the first ethical unit trust in 1973. At that time it failed to obtain approval from the Department of Trade, but a few years later permission in principle was granted.

The apartheid regime in South Africa accelerated the promotion of ethical investment in the 1980s, and in 1983 EIRIS was established as the UK’s first independent research service for ethical investors.

In the same year, Friends’ Provident (which had been founded in 1832 to provide life assurance for members of the Society of Friends, more commonly known as Quakers) offered to manage an ethical fund, with the investment criteria determined by a separate committee. This led to the launch of the Stewardship Unit Trust, the Stewardship Life Fund and the Stewardship Individual Pension Fund in June 1984. Meanwhile, Charles Jacob was appointed as a founder member of the Stewardship Committee of Reference.

As the twentieth century drew to a close, more churches, charities and individuals were beginning to take ethical criteria into account when making investment decisions. By 2000, the field had gained a major coup: it became UK law that occupational pension schemes should declare whether they took account of any social, environmental or ethical factors when deciding where to invest.

Discover more: What is Responsible Investing?


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