16th July 2010
A piece by Citywire on ethical investment on its New Model Adviser site, entitled 'Does ethical investment matter in a recession?', shows how controversial this area remains.
It asks the apparently straightforward question whether the Government is likely to abandon many of the green schemes in place as it tries to save money, and what this will mean for ethical investment.
This is valid enough, but it makes the mistake of referring to that age-old cliché that it is difficult for ethical investments to perform.
The Citywire/New Model Adviser financial adviser community are quick to comment. Brigid Benson retaliates: "I wish journalists would do their homework, instead of easy headlines and scaremongering.
"Read the Mercer Report commissioned by the UN, which clearly showed that ethical/environmental funds need not underperform – they looked at the 20 yr picture."
But could the Government's apparent lack of interest in green issues impact the sector?
Neville White makes the point, also on Citywire, that it can be an easy trap to equate "ethical" investment with restriction, antiquated ideology and loss making: "There is a clear and undisputed business case for investing in sound, well managed responsible businesses.
"Government investment in initiatives designed to de-carbon infrastructure (conditioned in part by legislative requirements) should not be confused with investment by pension funds and individuals in profitable, sustainable industries."
This Schroders' Talking Point piece (in PDF format) suggests that many of the green measures devised as part of the stimulus packages are still working their way through the system.
"In China around 40% of the country's four trillion yuan budget was earmarked for the development of green technologies, such as solar and wind energy, and electric car production."
The HSBC responsible investment policy document makes it clear that it is issues of sustainability rather than simply profitability that drive its ethical framework.
Although the Budget's failure to mention green issues will be a blow to some companies, it is the avoidance of a BP, rather than the discovery of the top nanotechnology stock that is perhaps the most important aspect of ethical investment.