KEY POINTS:
Ethical Investment Association director Dr Rodger Spiller explains ethical investing.
What exactly is this ethical investment all about, and why should we do it?
Ethical investment (otherwise known as socially responsible investment (SRI) or sustainable and responsible investment) involves using your money in accordance with your ethical principles and standards.
What sort of ethical investments can I consider supporting with my money?
You could consider environmental protection, recycling or renewable energy or avoid tobacco or armament production. Ethical funds have charters that explain their policies, and you can find funds suited to your preferences.
What are the kinds of investment options available if I want to invest ethically?
Options range from community-based investments to local and international share funds. Managed investments can be complemented by direct investments, such as fixed-interest securities and shares. Community-based initiatives have been an important part of the New Zealand ethical investment scene for many years. An early pioneer was Prometheus, which lends to people and projects that make a positive contribution to society by incorporating social and environmental responsibility, sustainability and sound business practices. Other organisations include the Just Dollar$ Trust and the Quaker Investments Ethical Trust. In 2002 Asteron launched New Zealand's first socially responsible investment trust, investing primarily in New Zealand-listed companies. Several Australian-based ethical investment managers also now offer their funds in New Zealand. Most of the Australian funds are certified by the Ethical Investment Association, and detailed information can be found at www.eia.org.nz
Are there financial advisers who can help me with my ethical investing?
A good adviser should be able to advise you on all classes of assets and investment styles, including ethical investment. But not many advisers are familiar with ethical investment and its various complexions. Advisers who meet the ethical industry standards can get certification by the Ethical Investment Association and the right to use the SRI symbol that means they offer SRI products; they have done professional development on SRI; and they conduct inquiries about client concerns about environmental, social, ethical and labour standard issues. The Australian Securities and Investments Commission states that advisers should seek to ascertain whether environmental, social or ethical considerations are important to a client and, if they are, should conduct reasonable enquiries about these.
Is ethical investing becoming more popular with the marketplace?
My experience in New Zealand indicates that ethical investments is becoming more popular; certainly, the level of inquiry and investment through my own personal investment advisory company has been increasing. The Ethical Investment Association Annual Benchmarking Report (available free at www.eia.org.nz ) shows that ethical investment in New Zealand grew by 18 per cent in the year ended June 30, 2006. In Australia, ethical investment managed portfolios grew by 56 per cent during the last financial year, from $7.67 billion to $11.98 billion, an increase of $4.31 billion. In comparison, mainstream managed portfolios grew 15.5 per cent in that same period. In the six years from 2000, ethical investment managed portfolios in Australia grew from $325 million to $11.98 billion, an increase of 3587 per cent (or 36 times). This area has also increased substantially internationally.
Can I do well financially with my investments and do good ethically?
There is ample evidence that investors can do well and do good, and there is no need to sacrifice returns for ethics. Furthermore, there are strong arguments to suggest that investors can do well by doing good and increase returns and reduce risks through expanding their bottom line from purely financial considerations to also take account of environmental and social factors. The Ethical Investment Association Benchmarking Study shows that the average Australian ethical investment share fund outperformed the average mainstream fund and the index. The average international ethical investment share fund also outperformed the average mainstream fund and the index. Academic research shows that financially successful companies invest more time in social and environmental issues, and that helps them financially.
Fund manager Generation Investment, of whom Al Gore is chairman, maintains that sustainable development will be a primary driver of industrial and economic change over the next 50 years and that shareholders will be best served by companies who maximise their financial return by strategically managing their performance in this new economic, social, environmental and ethical context.
Ethical investment and ethical business is enlightened self-interest for investors and businesses.
* Dr Rodger Spiller is managing director of personal investment advisory firm Money Matters (NZ) Ltd and ethical investment research Rodger Spiller & Associates. He is a director of the Ethical Investment Association.
