Ethical funds: doing ‘what it says on the tin’

Early clients of Barchester Green Investment who wanted their money placed in ethical or environmental funds had a limited choice – only a handful of funds were available and they were entirely equity based, focusing on either UK or international shares. Twenty-six years later, there are now more than 100 funds from which to choose, covering most geographical sectors and catering for a variety of appetites for risk – from the very cautious to the highly adventurous.

This growth in the variety of ethical and environmental funds represents a success for those of us who have long believed that everyone has an innate (if, sometimes, unrecognised) preference for their money to be invested in a way that benefits humanity – or at least does no harm. Every step forward, however, inevitably throws up new issues and challenges and in the field of ethical investment one of the most significant has been the dilution of ethical criteria. For the last ten years or more some funds, which would have once refused to invest in banks because of the problems they caused in lending to Third World countries, have included them in their portfolios despite the more recent issues surrounding the behaviour of banks. It is noticeable that those ethical funds which continued to exclude banks returned rather better figures in the difficult years between 2008 and 2010. Meanwhile, other companies have added ‘ethical’ or ‘environmental’ funds to their offerings, some of which include companies that beggar belief. The Zurich Environmental Opportunities Pension Fund is probably the worst (or best!) example with 14.9% of its holdings in three companies – Royal Dutch Shell, BP and Rio Tinto Zinc. [Source: www.trustnet.com, 15 July 2011] When we published our list of ‘Heroes and Villains’ in 2010 we received a considerable amount of press coverage which generated many enquiries from new and existing clients who were disturbed at the degree to which ethical and environmental funds don’t always do ‘what it says on the tin’. At the other extreme, there seems to be an increasing number of investments becoming available which, although they sound very worthy from an environmental stance, are not subject to the usual regulatory framework and must therefore be seen as very high risk. Our job is to help guide you through this increasingly complex world with one eye on your financial requirements and one eye ‘beyond the bottom line’. We look forward to continuing to perform that role.