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Social climbers

The Ethical Investment Association was founded in early 1998 by a small group of specialist IFAs. The aim was not only to promote ethical investment to the public but also to encourage IFAs to learn more about the subject.

A meeting in late 1998 was well attended and soon the membership grew to around 30 ethical investment experts working from all parts of England. Officers were elected and quarterly training and discussion meetings arranged.

Now the reputation, growth and performance of ethical funds has improved so much, many financial services companies are keen to develop the area. Even small firms are afraid to miss out on
what is clearly a good business opportunity.

Government involvement has played a big part in the increasing awareness of the effects of social, ethical and environmental factors in investment. The Greening Government Initiative of 1998/99, an all-party Parliamentary group on socially responsible investment, a social investment taskforce and an amendment to the Pensions Act in 2000 all bear testimony to this.

These were all clear indications that professionals working in wealth and risk management would soon need access to knowledge of how to approach the issues involved. Now that occupational pension funds and stakeholder schemes must by law declare their stance on socially responsible investments in their statement of investment principles, trustees are beginning to seek advice.

The public has also reacted positively. A recent Friends Ivory & Sime/NOP survey of occupational pension scheme members revealed that 74 per cent want their pension fund to encourage socially responsible behaviour by companies, while 85 per cent want socially responsible options on their fund.

The Ethical Investment Research Service has calculated that total assets in ethical funds increased by more than sevenfold throughout the 1990s. It should now be accepted that ethical funds are an important sector in most clients&#39 portfolios. Such options in Isas and regular savings are also becoming more important to the smaller investor. There are 46 UK ethical and ecological unit trusts and Oeics currently available to the retail investor.

But for the IFA feeling unable to cope with the knowledgeable ethical investor, help is at hand. The UK Social Investment Forum holds seminars which cover all the important elements of advising on socially responsible investment. As well as Eiris, Ethical &Environmental Screening Services in Cheltenham will help analyse a client&#39s portfolio while Forum for the Future is a good source of information.

To understand the background to socially responsible investment, reading The Ecologist is as important as reading The Economist.

Mark Mansley, a leading analyst and researcher on the links between finance and socially responsible criteria, has written a guide entitled, Socially Responsible Investment, for pension funds and institutional investors.

The most well known providers are always happy to help IFAs with guidance from one of their experts, such as Charles Henderson of Aegon, Julia Dreblow at Friends Provident and Garry Topp from the Henderson/NPI team.

New funds and products are being launched constantly. NPI now has a soc-ially responsible with-profits bond available with a 10 per cent UK gilt content.

Ethical venture capital trusts have also been marketed successfully. Triodos Bank and the Ecological Building Society cater for those keeping funds on deposit while specialist mortgages are available from the Ecology Building Society for renovating derelict property.

The Ethical Investment Co-operative offers standard loans from mutual lenders with an environmental survey of the situation of the property.

There is constant media coverage of ethical and socially responsible funds and many analysts predict a boom for the foreseeable future. The focus is on sectors and companies whose activities directly contribute to or benefit from the secular shift to environmentally and socially sustainable economic activity.

NPI currently concentrates on public transport, education, healthcare, renewable energy, telecommunications and new technology. Friends Provident has initiated a project called Responsible Engagement Overlay which applies to non-ethical funds. The researchers will encourage companies to improve their conduct on social and environmental grounds, which is expected to improve profits for shareholders.

Morley Fund Management, which manages funds for CGNU, has recruited an expert team of ethical researchers and fund managers. Six socially-responsible funds are awaiting FSA approval. Such a large and powerful organisation is not likely to have made such a massive investment before assessing the potential of this marketplace.

If you do not know the meaning of engagement, triple bottom line, positive and negative criteria, best of class, dark green and light green funds but would like to learn, then joining the Ethical Investment Association will help you. Our next training day will be held in Birmingham on March 5.


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