The Strategist

Conscious investment wins increasingly more supporters

02/24/2017 - 17:31

Investment in projects not related to the military industry, violation of human rights or harmful to environment, keep growing every year. Their total volume has already reached several trillion dollars. Corporations has long been forced to take into account opinions of consumers who might not want to buy their goods produced in violation of the ethical norms. Recently, investment funds also turned to this attitude, listening to growing demands of their customers and investors.

Conscious investment wins increasingly more supporters
According to US SIF, the Forum for Sustainable and Responsible Investment, total volume of such investments worldwide totaled $ 8.7 trillion in last year. The figure is 33% bigger than in 2014 and already makes one fifth of total investment made by professional investors. According to study of Callan Associates consulting firm, 37% of American institutional funds, managing assets of $ 843 billion in total, have introduced the principles of "responsible" investments in their investment strategies, taking into account social and environmental factors. Compared to 2013, number of such funds in the US climbed 22% up. £ 1.5 billion of such investment have been made in the UK last year. 

Increasingly more investors become convinced that "triple bottom line" concept, which is essentially a combination of financial, social and environmental parameters in assessment of an investment project, does not involve additional costs. Shortly, this means that "conscious investing" does not necessarily mean diseconomy. Recent studies show that investment in accordance with personal values and ethical principles has no negative impact on financial results. In addition, some analysts believe that those who pay special attention to solving social and environmental problems will be more competitive in the long run, and, therefore, investments in them have greater appeal.

"People want to invest in things that are consistent with their values," - told Blaine Aikin, Executive Chairman of Pittsburgh technology company FI360, in an interview to U.S. News & World Report.

This week major British company St. James's Place, manages assets of wealthy people, announced new, more stringent requirements for their portfolio managers, obliging them to implement their strategy according to the ethical investment principles.

"This is happening partly because people started to more and speak about it write - said Chief Investment Officer of SJP Chris Ralph in an interview with FT. There is one more reason - people are watching what is happening in society, and begin to understand that there are some things to think about." 

Some investors have been using this approach for a long time. Take, for instance, the Government Pension Fund of Norway, the largest sovereign fund in the world. Back in 2012, the organization sold stocks of 23 palm oil producers after it became clear that their production harms the rainforest. In June 2013, the Council on Ethics advised the investment fund to change its policy in relation to US defense group Lockheed Martin, and to remove the company it from the fund’s investment plans. Currently, the Norwegian fund’s list of "non-ethical" companies comprises about 50 companies, including tobacco companies, European concern EADS, American Boeing, General Dynamics, Wal-Mart, mining company "Norilsk Nickel", Rio Tinto, Chinese Dongfeng Motor and Shanghai Industrial Holdings and many others. In 2016, Norwegian State bank Norges Bank excluded 52 coal companies from its investment plan.

Even those investment funds whose activity is strongly associated with maximum diversification of investments have to pay attention to ethical side of their investment. In March last year, Rockefeller Foundation announced its withdrawal from assets associated with hydrocarbon production and processing. According to opinion of the fund’s owners, investments in this sector do not have much sense either ethically or from a financial point of view when the whole world is trying to reduce their use.


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