Ethical investment funds are not so green, says report

07 February 2008 / by Verity G
A study of the top ten Ethical and SRI (Socially Responsible Investment) Fund holdings available in the UK has revealed that, despite calling themselves 'ethical', only a small percentage are actually investing in companies actively tackling climate change.

Independent financial advisors, Holden and Partners conducted the in depth analysis of the top ten holdings of every SRI fund available to retail investors in the UK in their 'Guide to Climate Change Investment' and found that the top ten table revealed some "surprising holdings" which include a number of multi national companies, many of which would not usually be associated with 'green' or 'ethical' investments.

Most funds had a sprinkling of small 'clean-tech' or environmental companies, but the vast majority invested heavily in banks and telecoms companies as well as large mining corporations and companies such as BP, Shell and Total. In fact, the report showed that most ethical funds had less than 20 per cent given over to environmental stocks.

Out of the 58 funds investigated in the report only Henderson's Industries of the Future fund claimed to have more than 50 per cent of its portfolio in environmental stocks compared to L&G's Ethical fund which held less than one per cent in eco companies, instead BG, BHP Billiton and Xstrata made up several of its top ten holdings.

In a report by the Daily Telegraph, Peter Holden, a partner at Holden and Partners, said: "SRI and ethical funds have not kept pace with the public's appetite for environmental solutions. Many are investing in mainstream 'old economy' companies whose contribution to solving environmental problems is questionable."

The Holden and Partners report follows Standard Life Investments' announcement that their ethical investments will no longer invest in airline stocks, a policy adopted following its Standard Life 2007 annual ethical investor survey in which 30 per cent of respondents stated that they would prefer a complete exclusion of airline stocks from the funds.

Julie McDowell, Head of SRI, Standard Life Investments, comments: "The views of investors in our ethical fund range are of paramount importance to us. We are unique in carrying out an annual survey to understand investor wishes and concerns and we seek, wherever possible, to reflect those concerns in the criteria applicable to our ethical funds."

"In light of the sizeable percentage of our investors wishing to avoid investment in airlines, the Ethical Committee has decided that our ethical policy should be adapted to reflect these views. I am sure that investors welcome the fact that they play an important part in helping to shape our ethical fund criteria."

However, despite the findings, the Holden report added that: "The environmental economy is enjoying strong growth and there are many funds out there making some very attractive returns for investors. But it is a complex area and we would recommend that anyone interested in making an investment seek financial advice."

© Fair Investment Company Ltd