Socially responsible investment (SRI) is one of the fastest growing sectors in the financial service...
Socially responsible investment (SRI) is one of the fastest growing sectors in the financial services industry. In Europe, there are now more than 220 retail-based SRI funds, up from just 26 in the mid-1980s.
The UK leads the way, with some 60 funds representing £4bn in investment and almost 500,000 investors .
John Fleetwood, an IFA with 10 years experience in SRI, says: 'Ethical investors are usually nice people to deal with and, as long as the investment meets their criteria, they will tend to stick with it rather than jump around looking for the best returns.'
Nice people to do business with is just one of the reasons SRI presents a ripe opportunity for intermediaries. Several factors at consumer, business and Government level are driving the growth of this sector.
Globalisation and advances in science, technology and communication have made us all more aware of the impact of business on the environment and society.
Investors have repeatedly seen companies suffer damage to reputation and risk to share price through incidents of poor practice involving ill-treatment of human beings or environmental degradation.
Sustained economic growth is increasingly understood to rely on sustained environmental resources and social inclusion as the following drivers indicate:
• 1999. NOP survey shows more than three quarters of adults think their pension fund should operate an ethical policy.
• 2000. MORI survey shows nearly two thirds of pension scheme members want trustees to apply social, environmental and ethical criteria to investment decisions.
• 2000. UN Global Compact launched ' international business community commits to principles of sustainable development.
• July 2001. 178 nations commit to Kyoto Global Treaty on Climate.
• 2000-2002. Regulations in UK and across Europe require pensions funds to disclose consideration of social and environmental issues
• September 2002. World Summit on Sustainable Development taking place in Johannesburg to be attended by Bush, Blair and other world leaders from business, industry and society
As global society now considers sustainable development a priority, the need for independent financial advice on socially responsible investing is greater than ever. With statistics showing SRI funds generally performing as well, if not better, than the market, IFAs are in a position to offer a timely and rewarding product.
The simple question 'do you have any ethical requirements?' may prevent the loss of sales opportunities. Research shows many investors simply aren't aware they can invest according to ethical criteria and only reveal their concerns when prompted.
IFAs able to identify and respond to these concerns can enhance their professional profile and expand their business.
As IFA Brigid Benson explains: 'It is nice to be able to talk about things besides money. It strengthens your relationship with people when you chat to them about their value systems.'
Paul Moody, head of business development at Morley Fund Management
Three years at Wells Fargo
Effective from 9 December 2019
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