Public demand is driving the evolution of green and ethical investment

It is UK National Ethical Investment Week and new research among consumers suggests we are moving into a new era for green and ethical investment. It shows not only how much the market has become mainstream but also that concepts such as stewardship have sparked the interest of the UK public at large more than many might realise. More than four in 10 people now define ‘green and ethical investment’ as a positive investment in activities that ‘benefit society and/or the environment’, rather than the traditional view that it is primarily a negative screening process, excluding companies involved in undesirable practices. Many ethical funds perform both positive and negative screening on investments, meaning that investors get the best of both worlds. The message that you can have both profits and principles in your investments has also got through to many consumers. Almost half of UK adults who were questioned in the survey said they want to ‘make money and make a difference’ with their savings and investments. It’s encouraging to hear that many investors are no longer shying away from the green and ethical sector based on the outdated premise that investment in these funds always results in lower returns. Our Amity International Fund is a case in point; it consistently appears in the top quartile of the IMA Global Growth sector and in the decade up to August 2011 outperformed the global sector by over 69%. There’s also a growing public appetite for areas such as responsible ownership and impact investing. The research found that around a quarter (23%) of British adults with investments want more information onresponsible ownership practices; in particular, whether their pension fund or investment manager is engaging on issues such as climate change and excessive executive bonus payments. This builds on recent well-publicised developments such as the year-old Stewardship Code and the launch of the Kay Review into the effect of UK equity markets on the competitiveness of UK business. In total, over a third of adults with investments want to know more about ‘impact investing’ i.e. investment designed to yield both a financial return and a broader benefit to society or the environment. This figure rose to 43% among 18-24 year olds. JP Morgan predicts that by 2020 there could be between $400 billion and $1 trillion invested in ‘impact investing’, with potential profits of between $183 billion and $667 billion in the next decade. Terms such as ‘impact investing’ and ‘responsible ownership’ barely registered in the public consciousness when the first National Ethical Investment Week was launched only four years ago. It is clear that beneficiaries and consumers have a more developed sense of the industry than many give them credit for. It is not just investments but other green and ethical financial products that are proving popular in the market. It found that 22% are attracted to green and ethical bank accounts; 18% to specialist savings and investments; 15% to insurance and 11% to mortgages. The market is spreading its wings and it is particularly good to see that this evolution and expansion is being driven neither by financial strategists nor regulators, but by public demand.

Sue Round is Head of Investments at Ecclesiastical Investment Management
Link to National Ethical Investment Week