Investment professionals

Common concerns

Isn't all this 'green' and 'ethical' business a fad?

All the indicators demonstrate otherwise. The recent battle between the supermarkets for green credentials shows which way the wind's blowing:

growing consumer and regulatory pressure on social, ethical and environmental issues increasingly benefits responsible investing
corporate social responsibility is now seen in many sectors as crucial to brand value
companies that contribute, and adapt, to emerging social and environmental challenges may offer superior long–term performance
climate change will keep the environment top of the agenda.

We have joined more than 280 top investment houses, with assets totalling £41 trillion, in supporting the Carbon Disclosure Project – a scheme that seeks information from companies on their exposure to climate change risks.^iv

Aren't responsible investment funds exposed to greater risk?

An estimated 70% of the value of top companies relates to 'intangible assets' such as 'goodwill' and 'brand reputation'.^v That's value exposed to social, ethical and environmental risks. Analysis of these risks can put responsible investment funds ahead of the game, by helping them identify companies that the market may have mis–priced.

Doesn't a restricted investment universe lead to underperformance?

All active managers filter stocks on different grounds. And recent studies have shown a link between companies' social & environmental management and financial performance^vi. It pays to be responsible and, increasingly, those who aren't – pay.

Performance with responsibility

With some product providers you hear a lot about "socially responsible" but not enough about "investing". Make sure that the providers you recommend have strong investment credentials, as well as claiming socially responsible expertise.

The Co-operative Asset Management Sustainable Leaders Trust is the first ethical screened fund to top the UK All Companies sector, beating over 320 funds including mainstream blue chip equity funds. And that's been achieved while excluding the Oil & Gas and Mining sectors – both strong performers over the period (i.e. 12 months to January 2007). This achievement is testimony to the sound investment fundamentals of the fund.

^iv http://www.cdproject.net/aboutus.asp
^v 'Bringing "Accountability for Brands" to the Boardroom: Is that my job too?' Paper No. 20040101 - By Michele Levine, Chief Executive, Roy Morgan Research. January/ February 2004 edition of The New Investor: February 12, 2004
^vi Orlitzky, M, Schmidt, F & Rynes, S 2003, 'Corporate social and financial performance: A meta analysis', Organization Studies, vol 24, no. 3, pp 403-11 and "A study into the influence of Environmental Governance and Financial Performance" Prepared by Innovest Strategic Value Advisers November 2004