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Historically ethical

Over the next five weeks Gary Kleyn considers ethical investments, starting with a look at the history of ethical investments.

WHILE ethics and business, driven by catch-phrases such as triple bottom line, appear to be a new phenomena, a look back in time shows that ethics, or their lack thereof, have been around as long as man has been involved in business.

Adam Smith, often called the father of economics, touched on the issue in 1759 in his book The Theory of Moral Sentiments.

While environmental groups, such as Greenpeace emerged during the 1960s, it is to the religious groups, particularly in the US, that the roots of modern ethical investment are founded.

In colonial America, the Quakers refused to invest in tobacco, alcohol, gun manufacture and anything that involved slave labour.

In the 1920s, the Methodist Church in North America decided to invest in the stock market after it was determined that share investing was not a form of gambling.

When investing, however, they excluded certain companies involved in alcohol or gambling.

In 1971, the Pax Fund was launched as the first generation of ethical funds. It was a reaction to the Vietnam War and the backlash against companies supplying weapon-ry to that conflict.

In the UK the Methodist Church’s investment manager Charles Jacob developed the first ethical unit trust there during the 1970s.

In Australia, during the same period, unions also took an active role in campaigning for labour rights and heritage and environmentally sensitive areas through the green ban movement.

The first ethical fund in Australia was the Friends Provident, which was associated with a UK fund. It was established in 1986 as the first prospectus-based ethical fund.

Australian Ethical, which operated a balanced unit trust, offered its first prospectus in 1989.

During the 1980s, socially concerned investors took on concerns about civil rights, the cold war and equality of women as well as anti-nuclear concerns.

The South African Government was targeted by socially concerned investors and churches during the era of apartheid.

More recently, shareholder activism has been the approach of groups and individuals concerned with the ethical business behaviour.

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