Amanda Tovey, investment manager and head of SRI at Whitechurch Securities, cites greater news coverage of social issues, including the lack of affordable housing, for having sparked a growing interest in socially responsible investing (SRI).
“Many people have started to think more about how they spend their money and the products they buy - how are they sourced/produced? Is it bad for the environment? Is there a social cost?” she says.
“This has, in turn, led them to question where their money is invested and look to align their investment choices with their lifestyle choices.”
The investment industry has also been working hard to bust some of the myths about sustainable and ESG investing which many believe has prevented these types of funds from entering the mainstream in the past. One of these is the belief that investors would have to sacrifice returns if they wanted to invest with an ethical conscience.
John David, head of investments at Rathbone Greenbank Investments, explains there is a combination of factors driving investor interest in ethical investing but that a key one is “there’s increasing evidence that investing ethically does not have a negative impact on performance, indeed, it might even contribute positively to it”.
He goes on: “For many years, the perception that there is a price to pay for taking social, environmental or ethical factors into account has dissuaded many from investing in this way, and also limited the number of advisers and discretionary fund managers (DFMs) promoting the area.
“But this change in perception, added to a growing awareness that there is a need for a more socially and environmentally sustainable economic system (plastics being a case in point) has helped drive growth.”
Shareholder influence
But Jason Hollands, managing director of business development and communications at Tilney Group, is a little more sceptical, citing Investment Association figures which show ethical funds stand at £16.7bn in funds under management at the end of July, which represents a “tiny 1.3 per cent share of the overall [investment] universe”.
He says while ethical consumerism has been on the rise, the trend is not mirrored in the investment world, despite the best endeavours of advocates to raise awareness of ethically and environmentally screened funds.
“Does that mean investors don’t care about issues like the damage being done to our oceans by plastic waste or climate change?” he asks.
“No, I don’t think so, because outside of the narrow realm of ethical and environmental funds the wider investment industry has become much more focused on the assessment of environmental, social and governance risks into their core investment processes, and are prepared to use shareholder influence to engage with companies on these matters.”
