The ethics of investing

The latest figures from an Ethical Investment Research Service (EIRIS) study in June 2010, show investment in Britain’s public ethical funds has climbed to a record high of £9.5bn.

“Over the 10 years, and particularly the last four to five years, there’s been steady growth in ethical investment. It may still be a fairly small percentage of overall investment, but it’s a growing chunk of money,” said EIRIS spokesperson Mark Robertson.

He told Channel 4 News that the financial crisis, combined with the growing awareness of climate change, has sparked more interest in the area.

More cynical
“The credit crunch has actually focused more attention on ethical investment. From a public perspective, people have become more cynical about what the banks are doing with their money.

“And from a risk perspective, if you’re a long term investor, you want to know how the company is responding to climate change and how it’s thinking ahead of the curve in terms of efficiency and reducing its carbon footprint.

“The growth in ethical investment has gone hand-in-hand with growth in ethical consumerism. People are switching to fairer trade products, renewable energy, and they’re making that link between where they invest their money as well.

“The industry has matured. It’s no longer just about avoiding things tobacco and arms companies. It’s now also about a turn to responsible investment in sustainable companies.”

“If it’s a vice it’ll make money. If it’s good for you it won’t.” David Battersby, investment manager

But some analysts say there is still not enough information about what constitutes an ‘ethical’ fund.

Investment manager David Battersby told Channel 4 News it remains a “very confusing” area.

“People often bring [ethical investments] up as a suggestion, and they want to do it, before they realise how difficult it actually is. We have to set out ‘What do you mean by ethical? Do you mean how they’re sourcing their raw materials, their environment impact?’

“It’s impossible to dissect a company to that degree,” he said.

Mr Battersby said that one area he “completely avoids” is tobacco, as the majority of people refuse to buy into the industry.

But he says other vice industries – such as gambling – are becoming more popular.

“There is a lot of interest in gambling firms, it’s an up and coming thing.

“If it’s a vice it’ll make money. If it’s good for you it won’t.”

“If you feel bad about yourself there are two things you’ll consume – alcohol and cigarettes.”

Mr Battersby also called for more screening of companies who are selected for the global FTSE4Good index, which up until September listed BP and Bridgestone as ethical companies.

During a financial crisis, he says investors should look to low-risk industries for safer investments .

“The area one wants to be looking at is things that aren’t affected by an economic slowdown. No matter how bad the economy and what you give up, you still have to eat to survive. So food retailing is an area where you’ll find, not necessarily growth, but no losses.”