SRI guidelines looming large

A RECENT Australian Securities and Investment Commission discussion paper may represent little more than guidelines to fund managers at this stage, but they could lead to a dramatic change in investment decisions made in Australia.

That was the reaction from the Ethical Investment Association to an ASIC paper on new socially responsible investing disclosure requirements.

If the mandatory guidelines are implemented the EIA believes fund managers would be more likely to consider SRI investments, while investors would make more informed decisions about what they are putting money into.

The guidelines are in line with the new Financial Services Reform Act, which puts the onus on all issuers of financial products to provide customers with full details on their SRI-related investment policies and procedures, regardless of whether they market themselves as an SRI fund.

All products must include disclosure of “the extent to which labour standards or environmental, social or ethical considerations are taken into account in the selection, retention and realisation of the investment”.

EIA president Michael Walsh said similar disclosure requirements introduced in France, Britain and the Netherlands had supported dramatic increases in the number and the size of SRI funds in those countries.

Despite the political momentum and growing awareness of the SRI investment market in Australia, recent research shows SRI investment has declined.

Last month research house Rainmaker Information released figures showing a $72 million fall in SRI investments for the September quarter.

Funds under management in the sector stood at $2.11 billion during the September quarter, compared with $2.18 billion in the previous quarter.

Other studies indicate that investors are dragging their feet when it comes to SRI investing.

Research released in 2001 by KPMG and Resnik Communi-cations reveals that there is a significant gap between consumer willingness to participate in SRI and actual uptake of SRI products.

The sector remains one of the most impressive performers in terms of percentage growth over the past year, however, expanding by 28.8 per cent.