Integrity anything but passé

As more people consider taking a greater hands-on approach to investment management, interest in ethical investing is reportedly increasing. And as Susan Bower reports, information services are keen to assist.

THE expectation of lower returns from ‘ethical’ company and funds investments, and a subsequent drop in interest from would-be investors, is a view being challenged by those offering investment information services.

Increasingly people want to be more aggressive about their investments and are considering companies with perceived integrity and a triple bottom line approach, Conscious Investing chief executive officer Margaret Baldock says.

For those investors starting from this base and then applying low-debt, high-return and management stability tests, the rewards are there for the taking, Ms Baldock says.

These are not just financial – the empowerment, fulfilment and fun spin-offs are almost as alluring.

Australian Shareholders Association member Gary Palmer agrees the fundamentals of investing, in general, still apply to all those interested in whatever they perceive as ethical, sustainable or green investing.

The term ‘ethical’ may now be considered passé, and not sufficiently definitive by the newer generation of those choosing to critique their would-be investments by individual ideal values and practices.

Whatever the terminology, more people are now interested in “investing in the future”, Mr Palmer says.

Some are more prepared to take on more risk in some investments, for example, within the renewable and biotechnology sectors, but there are also more services, now, to help independent investors “do their homework” before making decisions, he says.

Investors wanting to invest in companies considered to be active in only ‘ethical’ activity can restrict their choices considerably if they screen out, for example, all banks and mining companies.

This will increase investment risk, Lifecraft group executive director Michael Walsh says.

However, those who may just wish to exclude major alcohol players, the weapons, gaming and old-growth forest logging industries, would still have more than 85 per cent of the ASX-200 from which to make their investment choices.

This gets around vulnerability in certain market cycles, Mr Walsh says.

While many still differ on their views of ‘ethical’, the attraction of practising ethical investment is still growing, according to Mr Walsh and Ms Baldock.

Despite slow growth in the financial sector as a whole during the past two years, the Lifecraft group and other services offering ethical investment advice are reporting tangible growth.

The Lifecraft group includes Corporate Monitor, which offers a socially responsible/ethical in-vestment (SRI) rating service, and Ethical Investor magazine.

Mr Walsh says 100 corporate organisations are now purchasing the ratings information on ASX 200 companies, some small SRI cap companies and SRI funds.

For investors interested in ethical funds, Mr Walsh advises a careful reading of each prospectus to determine if the mix matches the investor’s ideal.

While the ethical funds differ in what they exclude from their portfolios, most stay away from gaming and weapons manufacturing stocks, uranium miners, and those companies associated with old-growth forest logging.

Any would-be ethical funds investor looking for a good proportion of renewable energy and biotechnology investments is likely to be disappointed, with most funds remaining comparatively cautious about growth prospects from these.

Corporate Monitor services were first offered in 1999, by Mr Walsh, who was also responsible for starting ASSIRT in 1987.

Groups such as the Ethical Investment Association (www.eia.org.au) and the Association for Sustainable and Responsible Investment in Asia (www.asria.org) support those interested in such investments.