|
|
|
|
|
|
|
|
|
|
|
Socially Responsible
Investments
Most people approach ethical investment having identified a
specific financial need: perhaps they have spare money and want to invest it
for the future; they may want to buy a house; it may be time to start saving
for retirement. It is common for SRI funds to be linked to certain savings
vehicles e.g. personal pension, ISA, monthly savings plan etc. so there may
be an SRI fund available that matches both your financial and ethical needs. Along side financial considerations it is worthwhile
identifying what your ethical priorities are. Remember that when it comes to
assessing the ethical performance of a company or an ethical fund there is no
such thing as a perfect company. All are involved in activities which someone
somewhere will object to; none go far enough in terms of positive social
contribution to satisfy all of the people all the time. Socially responsible
investment is about compromising and prioritizing – light and dark
green. How an ethical investment policy is developed and adhered to
will vary between ethical funds. For example some may have an independent
ethical committee that has the ultimate say on policy and investments,
others may delegate the responsibility to the fund manager. Some may have a
combined structure where a committee agrees the overall policy, but the
actual criteria used and ultimate investment selection is left to the fund
management team. Ethical funds invest according to a very wide range of social,
environmental and other ethical criteria. There are several different ways
that an ethical strategy can be applied to investments, the three main ones
that are generally talked about are screening, preference (or best in class)
and engagement. These strategies can be used in combination as well as on
their own. Screening is
probably the best known amongst consumers - this is where companies may be
excluded because of their involvement in certain activities such as nuclear
power, the fur trade, tobacco and so forth. This approach also applies where
companies may be included for positive contributions to society and the
environment such as energy efficient technology, organic farming for example.
Many of the long-standing ethical funds have some form of screening. A preference or best-in-class approach would
apply social, environmental and ethical guidelines to give a preferred
selection when all other factors are equal such as sector type and financial
performance. So for example, a fund manager who has to invest in oil stocks
may have a best-in-class approach and select the oil company with the best
environmental management. The third approach - engagement - does not
necessarily exclude, include or prefer companies but rather the investor (or
representative such as the fund manager) will actively encourage companies to
adopt social and environmental best practices. Some ethical funds have their own internal research teams analysing company activities in order to identify
suitable investments for their fund's portfolio. Others use external research
providers such as EIRIS to get information on companies, and only undertake
the financial analysis of companies. Some funds will be very active in communicating the activities,
not just financial outcomes, undertaken by the fund on behalf of its
investors. Some will go as far as asking investors about their ethical
concerns and priorities. With share
ownership comes shareholder influence and voting
rights at AGMs. Some ethical funds will have a
corporate governance policy that will guide how they use their votes at AGMs and shareholder resolutions. So when choosing an ethical fund we think carefully about
which sort of fund you want to invest in. You may have concerns that extend
beyond the question of which companies the funds invest in, and what they
do. Our panel includes various funds
with different ethical criteria and we would be more than happy to discuss
this with you in more detail. |
This Company is Authorised & Regulated by the Financial Services Authority