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Responsible Investment

While ethical investment is not as well known or publicised as property investment or equities, it is growing in popularity. More and more investment portfolios now include a share in ethical investment.

The recent financial crisis has led many investors to take a closer look at funds and focus on where and how their money is invested. Not surprisingly, this has led to an increased demand for responsible investments. According to figures from the Investment Management Association, UK investors put £62.2 million into ethical investment funds during the last quarter of 2009.

This tendency looks set to continue; in a recent survey, Cooperative Financial Services found that 13% of investors were looking into ethical or sustainable funds for ISA allowances. And responsible investment isn't just for the small investor - more and more high net worth individuals are also sourcing responsible funds for their money.

Lack of exposure means ethical investment is surrounded by myths. The biggest is that ethical investment is often a bad performer, a misconception that has been proven more than wrong by fund results during 2009. In its Responsible Investment & Wealth Management Opportunities report released late last year, EIRIS reveal that 90% of wealth managers said their responsible investment portfolios had the same or better results as other portfolios.

Ethical or responsible investment funds have been around for several decades. The first modern ethical mutual fund is believed to be the PAX fund, established in 1971 to avoid investments linked to the Vietnam War. Nowadays, there are hundreds of funds offering responsible investment in activities perceived as positive for the environment and/or society.

The increased profile of global warming has brought investment in green activities such as renewable energy or sustainable timber to the forefront. Ethical funds also invest in companies manufacturing energy saving products such as water meters or electric cars. Socially responsible investment aims to help society by choosing products such as low-cost housing projects or investing in companies who provide equal opportunities.

As well as investing in responsible ventures, ethical investment also goes out of its way to avoid so-called negative activities. These include the tobacco industry, nuclear power, arms dealing and child labour.

Some of the world's largest institutional investors including a handful of stock exchanges such as the FTSE and Brazil's Bovespa are signatories to the United Nations Principles for Responsible Investment agreement. Signatories are required to report their socio-environmental initiatives to the general public to facilitate information on responsible investment.

Bovespa signed the agreement earlier this month, reinforcing the commitment to information about responsible investment in Brazil. Bovespa has a history of initiatives to promote responsible investment - it was the first stock exchange in the world to sign the UN Global Compact in 2004 and it established the Corporate Sustainability Index in Brazil in 2005.

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