Ethical money rolls up its sleeves
Town &
Country Planning, March 1999
Remember the days when local authorities, charity
trustees and church commissioners blanched whenever the
words 'ethical investment' were mentioned? Well, they don't
any more.
Or they don't have to anyway. Most of them have discovered
there is no legal bar to investing ethically. And for local
authorities reluctant to invest their money in a foreign
multinational dedicated to despoiling the local environment,
that wasn't a moment too soon.
Now there is nearly £2 billion is
invested ethically in the UK and well over 300,000
policy-holders have money invested ethically.
What's more, a government minister has warned pension
trustees that they are going to have to reveal their ethical
policy. At one stroke, John Denham has done away with years
of official belief in an amoral market, where trustees have
to seek the highest return &emdash; no matter how it
conflicts with their charitable aims.
But there is a revolution going on within the
burgeoning ethical investment industry as well. Ethical unit
trusts used to screen potential places to put their money,
and exclude anything they disapproved of. They still do, of
course, but increasingly they also want to connect &emdash;
and change &emdash; them as well.
There are mainstream unit trusts, like
NPI Global Care, which pride themselves on positively
seeking out ethical places to invest &emdash; rather than
puritanically refusing to invest in anything which might be
a little bit tinged. And beyond the mainstream City
investment houses, there is a growing range of ethical money
organisations which allow investors to connect directly.
The ethical investment research service EIRIS has just
published a list of what they call 'cause-related
investments'. They range from buying shares in the third
world development trade company Traidcraft or the
environmental supermarket Out of this World, through to
opening an account with the Triodos Bank which funnels
investments into social housing.
Triodos' Just Housing account was launched together with the
Churches National Housing Coalition and has helped their
UK-based savings grown by 119 per cent in its second year of
operation.
In the USA, all this is nothing new. Building on the very
successful South Shore Bank in Chicago, there are now 50
community loan development funds in the USA, which have
managed to invest over $350 million in affordable housing,
and leveraged another $3 billion in public and private
investment.
In the UK, the leader of this particular pack is probably
the Aston Reinvestment Trust, one of the first of its kind,
re-using about £700,000 in local savings to regenerate
the local economy.
The sector received a big boost a year ago with the launch
of the Rebuilding Society Network, dedicated to encouraging
new loan funds in the UK, making loans at affordable rates
to small businesses and the voluntary sector.
According to solicitor Malcolm Lynch, there is now about
£100 million in cause-related investments in the UK,
well over half of which is with the Anglo-Dutch Triodos.
They are not for the faint-hearted. The returns aren't as
exciting as you might get in the City &emdash; though the
social returns are undoubtedly better &emdash; and it can
sometimes be difficult to sell on these alternative shares
when you need the money.
But for people who want their money to play a useful role
&emdash; rather than boosting the overstuffed offshore funds
of Jersey and Guernsey &emdash; this is going to be a
growing field.
"Who wants to invest in a company whose share a prospectus
warns that the risks will be high, the returns lean or
non-existent, and the chances of extra taking a money later
very remote," said a special report in the Observer
on 15 November. "The answer is, a surprisingly large
number of people."
The EIRIS Guide to Cause-Related Investment is
available from EIRIS at 80-84 Bondway, London SW8 1SF (send
a large SAE). Rebuilding Society Network is at 115 Hamstead
Road, Birmingham B20 2BT, rsn@gn.apc.org.
David Boyle is an associate of the New Economics
Foundation and the author of Funny Money
(www.funny-money.co.uk)
