The following article was first published in One Earth Magazine Vol 8 Issue 1 Spring 1988
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There are now a variety of possibilities open to individuals wishing to use their savings in an ecologically and morally appropriate way. The market for such socially oriented funds is large and well documented in the USA. This article looks at some of the alternatives being offered in the UK, Europe and Australasia.
One of the greatest challenges facing humanity today is the right use of money. It is obvious that financial greed is largely responsible for many of our ills, yet until recently there have been few opportunities for individuals to invest their money in projects that support the well-being of our planet.
Increasingly however, channels are emerging for the creative and positive use of capital, which provide individuals with a return for the use of their assets, and at the same time seek to support ecological, humanitarian, and spiritual ends rather than morally neutral profit maximising ventures. Indeed, in the United States the ‘ethical investment’ business is growing rapidly and is now worth over $100 billion. This a rapidly growing service, and early research shows that such investment is often able to provide a better financial return than more traditional techniques[1] .
The UK and Europe have been a little slower to seize the possibilities offered, but now there are a number of options available on this side of the Atlantic, and elsewhere in the world, to those who wish to utilise their savings and investments in a socially and spiritually responsible way. These possibilities cover the spectrum of options from secured loans at fixed interest, to stock market based Unit Investments and venture capital funds. Here is some information about a few of them.
Essentially ethical investment falls into two categories that might be called active and passive. In the former category the investment agency actively seeks new projects that conform to its philosophical aims as a whole. Typically, although not exclusively, this means that the organisations which receive the money are smaller businesses and co-operatives, as this form of investment tends to encourage the development of economic activities which are actively seeking to change the economic system, and are by definition not part of the mainstream.
The second category is much larger as it involves the screening of companies and other organisations against negative criteria such as involvement in arms dealing or gambling, and then investing in them in the ordinary way, usually through the stock market. Obviously this is not a case of ‘black and white’ but of shades of grey, for an active investment agency might well lend to a traditional craft industry in much the same way that an ordinary bank would, and a passive agency might engage in comprehensive screening for a particular company’s activities before purchasing shares. However the essential difference is that the first group are really attempting a change at the grassroots level, whilst the second are hoping to achieve the same thing through market pressures.
Interestingly, the recent stock market crash favours the development of the active agencies over the long term, as although they generally offer lower rates of return on capital, the huge drop in share values that has rocked markets in recent months leaves their investments virtually untouched. The main problem this change in market conditions causes for them is that less money is likely to he available due to losses made elsewhere. For many individuals ethical investment of this kind has been a goodwill gesture in addition to potentially more profitable excursions into other areas of the market. Whether current conditions will lead to a greater degree of public interest in the active ethical opportunities remains to be seen, but given the perilous state of the world economy at present it seems likely that many individuals will perceive this kind of option as being in their own interests in the long-term as it fosters a more sane and sustainable economic system, as well as providing a morally acceptable alternative.
Alex Walker
For the passive ethical agent the continuing downward spiral of share prices has had much the same effect as on any other investment house. The good performance of many US ethical houses relative to the market in recent years was partly because they eschewed the nuclear industry, which the rest of the market invested in heavily. The problems this industry has faced in recent rears caused huge losses which the ethical trusts did not incur. Across the board falls in share prices offer less opportunity for strong relative performances from the passive ethical agencies, but there are some indications that they may have fared better than run-of-the-mill funds. Larger, blue chip companies have been hit most heavily by the crash, and as many ethical funds have tended to concentrate on smaller companies which have done relatively well, it may be that they will in fact ride out the storm more comfortably. The Friend’s Provident Stewardship Fund for example was still showing a growth rate more than twice that of the FTSE 100 index in the immediate post-crash period. It is however too early to tell what the medium term effect of the Crash of 87 /88 will be on their overall performance.
Having drawn this distinction between the active and passive market, here are some details about six British organisations involved in this field. The first two are active agents, the second two passive, the fifth one some where in the middle, and the last is an information agency.
Mercury Provident PLC – The Steiner movement has perhaps the longest and most honourable tradition of ethical investment. Rudolf Steiner, the Austrian founder of Anthroposophy, lectured widely in the first part of this century and included economics and social organisation in his discussion of the nature of human life and its relation to its spiritual source. There are now a substantial number of ‘Steiner banks’ in many countries in the Western world, and Mercury Provident, whose head office is in Forest Row, Sussex is the British arm of the movement.
Founded as a Provident society in 1974, Mercury is now a licensed deposit-taker under the Banking Acts, and a public company. The organisation has been involved in a wide field of activities from Waldorf education ( the system developed by Rudolf Steiner) to organic farming, and is active in encouraging lenders to use their money in a more conscious way. Interest is negotiable up to a maximum of 8%. You may invest in Mercury by buying shares or by making a deposit for a specified length of time. Lenders are encouraged to take an interest in the project(s) their capital is supporting.
The Findhorn Foundation has of course developed strong links with the anthroposophical movement over the past few years, particularly with the opening of the Moray Steiner School in 1985. The Trustees of the Foundation have also met with the directors of Mercury on frequent occasions and it is hoped that in future Mercury’s banking experience will aid many of the emerging businesses in the ‘planeta1y village’ and provide the basis for a healthy financial community of interest.
The Financial Initiative Ltd.- is active in matching investors wishing to support and profit from enterprises meeting human and ecological standards which are conceived for the good of the whole. Enterprises which combine a commitment to sustainable human and environmental practices with a professional management and commercial outlook are favoured. Investors typically take a minority equity stake with the expectation of their investment being realisable in three to six years. The Financial Initiative also offers personal financial counselling services.
The Ethical Investment Fund – is a Unit Investment operating from the City of London underwritten by Royal Heritage Life Assurance which specialises in this kind of investment. The EIF is guided by a broadly based investment panel. Its policy is to invest in successful companies both in the UK and overseas, avoiding as far as possible those involved in activities that may be regarded as anti-social.
Individual investors purchase units in the bond which are valued on a weekly basis according to market movements. Like all funds investing in securities the units can fall as well as rise in value, depending on market conditions. The bond is a tax-efficient means of hedging inflation, which can give a regular tax-free income as well as capital gains, and can also be used in conjunction with Inheritance Tax planning. The managers of the fund, D.J. Bromige & Partners Ltd., are also able to offer a personal portfolio management service, and investment advice on an individual basis.
Friend’s Provident – are a well established investment agency which was founded on Quaker principles over 150 years ago. They opened the first Unit Trust in Britain to operate on ethical lines called the Stewardship Unit Trust. The Trust concentrates its investments in the ordinary shares of selected UK companies “whose products, services and operations are of long-term benefit to the community”. The fund avoids companies involved in gambling, alcohol, tobacco and South Africa “as far as practicable”. Since opening on lst June 1984 the value of the investments in the Trust have grown to over £78 million, and it has been so successful that the company has recently opened a “North American Stewardship Trust” to cover that market as well.
Ecology Building Society-This Society will lend to any freehold or leasehold land which “will promote an ecological state of living”. The Society’s rules state that “advances shall be made to persons or on properties which are most likely to lead to the saving of non-renewable resources, the promotion of self-sufficiency in individuals or communities, or the most ecologically efficient use of land”. In particular this organisation is interested in derelict but sound houses which would otherwise have been abandoned, farms, craft workshops, crofts, and green field sites used for replacement housing. Buildings must be properly insulated in roof and walls to qualify.
EIRIS – An information service called EIRIS (Ethical Investment Research and Information Service) operates from 9 Poland Street, London. They have a large amount of information on social funds and the activities of individual companies, and have been active in publicising some of the prominent ethical investment issues in the UK and elsewhere in recent years. Amongst these was the BMA’s revelation that a large number of health organisations such as cancer charities were investing in the tobacco industry! EIRIS has published an excellent guide called “Socially Responsible Investing”
Elsewhere in the World
There are also a great many opportunities for ethical investment outside the USA and the UK. The Steiner movement offers anthroposophical investment options in Australia, Austria, Belgium, Brazil, Denmark, France, the Netherlands, New Zealand, Norway, Sweden, Switzerland, and West Germany. Information on these organisations is available from Mercury Provident in Forest Row.
Holland boasts a variety of other such organisations including MEMO, which brings together investors and New Age projects, and Coriolus BV which is the trading arm of the Elfenbank. (Despite its name, this latter organisation is a residential spiritual community, not an ethical investor itself.)
There are now a number of ethical funds operating in Australia including the Southern Cross Capital Exchange of Wentworth Falls, NSW, the Earthbank Society of Chatswood, NSW, and August Investments of Box 3138 Sydney. New Zealand is also active and there are several funds operating there including CELT, Box 68-091 Auckland.
This is just a sample of the organisations now operating worldwide – there are many more. Although the prospect of trying to change the moral code of the world’s financial juggernaut can seem a daunting task it is worth remembering that the largest and most powerful multi-national conglomerate would go bankrupt very quickly if everyone refused to buy its products or invest in its shares. Exploring the theme of “Right Livelihood”, with ones personal finances can be a rewarding endeavour, and as experience has shown, it can be a profitable one too.
Addresses for further information.
Mercury Provident PLC, Orlingbury House, Lewes Road, Forest Row, Sussex RH18 5AA
Ethical Investment Fund, 10 Queen Street, Mayfair, London WlX 7PF.
Financial Initiative Ltd, Eversley House, 1 Elm Grove Road, Salisbury, England.
Friend’s Provident Unit Trust Managers Ltd. , FREEPOST, Pixham End, Dorking , Surrey.
Ecology Building Society, 8 Main Street, Cross Hills, Keighley, West Yorks, BD20 8TB.
Stichting MEMO, Damrak 37, 1012 LK Amsterdam, Netherlands.
Coriolus BV, M.L. King 163, 4102 GV Culemborg, Netherlands.
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