Friends of the Earth
Action Briefing June /July 1999
|
Birmingham Friends of the Earth Action Briefing June /July 1999 |
For some years I have been watching the growth of ethical investments and considering their importance. Industry is responsible for many of the current problems of pollution, waste and over consumption. But rather than being purely negative, if industry acts responsibly it can play a major role in helping us all to live in a sustainable manner.
Industry does of course listen to its customers and shareholders, so we can all influence its actions. In recent years the pressure for industry to act ethically and have regard for the environment has increased considerably. Indeed, there is now pressure for industry to consider the needs of all its stake-holders, i.e. customers, shareholders, employees and local communities alike. This wider remit goes far beyond the conventional thinking of merely trying to maximise profit with little regard to the methods employed or consequences. Now the "polluter pays" principle is gaining both credence and momentum, whereby industry must consider the result of its actions and the resultant impact upon the environment.
As the pressure from the City, private investors, financial institutions, and pension funds increases, much of industry is now adopting ethical and environmental policies. Often the motives of industry for implementing such policies, are merely the result of a perceived need to improve the corporate image. In many instances action taken is minimal, and the policies themselves are poor in substance and not very effective. Nevertheless, it is a step in the right direction and, as competitors become more sophisticated, the need not to lose a competitive edge will help ensure continuous improvement.
Similarly, ethical investments are performing an important function in providing industry with the message that its investors and customers want it to care for the environment. Initially these funds tended to merely select investments from those industries that were not unethical, i.e. from industries excluding tobacco, arms, alcohol, etc. Consequently, a typical portfolio may contain many companies who may not be pro-active in caring for the environment, but may merely belong to an industry that is not perceived to operate unethically. Unfortunately, all too many such organisations still only have "token" ethical and environmental policies while their contributions remain minimal. Nevertheless, I have always taken the view that this is preferable to having no such policies at all and will encourage the adoption of best environmental and ethical practice in the future.
I personally have invested in the Friends Provident (FP) Stewardship Unit Trust which claims, "the scheme provides an investment medium for those who do not regard financial gain as the sole criterion for investment but look to wider issues. Investment is concentrated in UK companies whose products and operations are considered to be of long term benefit to the community both at home and abroad..." The selection criteria are understood to be largely subjective at present.
I recently wrote to Friends' Provident (FP) to confirm my support for their work, ask for a list of the selection criteria and suggest that, now the Stewardship Unit Trust has been firmly established for a number of years, it should only invest in those companies who can demonstrate they have effective ethical policies and effective environmental management systems. I suggested such companies should be able to state what their environmental objectives are; how they have performed (i.e. actual results versus target); confirm that these results have been independently monitored/audited and finally publish these results for the benefit of potential investors and customers. All of these stages are of course requirements of the Eco Management Audit Scheme (EMAS).
I also suggested Friends' Provident give notice that in twelve months it should expect any organisation it invests in to demonstrate that it is taking serious steps to gain EMAS (or at the very least ISO 14000) accreditation. I further suggested that in two years Friends' Provident only invest in organisations that are EMAS registered. Such action would clearly provide FP with the opportunity to differentiate between those companies who are genuine about their commitment to the environment and those who are not. I was heartened by the response which includes the following:
To summarise the conclusions, clearly such ethical investments are of great importance in giving industry the right messages. Funds such as the FP Stewardship Unit Trust can and do play an important role, which is becoming increasingly sophisticated.
If you are an investor in an ethical fund, write a positive letter to offer your support for the work done. In addition you may also wish to recommend practices which should become prerequisites of any company in the respective portfolio, such as EMAS or ISO 14001 accreditation.