Ethical funds’ design and objectives were laid out to around 100 participants at an APS Bank seminar themed ‘Introducing ethical investment in a dynamic society’ at the Radisson Blu Resort St Julian’s earlier this month.
The way we invest matters. We live on a small planet
The event came just days after APS Funds SICAV plc launched Malta’s first retail ethical investment fund. Managed by the Church-owned bank, the Regular Income Ethical Fund has a medium-risk profile with investments directed at companies meeting its ethical policy on social and environmental values.
Attended by Archbishop Paul Cremona and Gozo Bishop Mario Grech among other religious, clients, staff and investment advisors, the seminar was opened by APS Bank chairman Lino Delia who pointed out that human behaviour has been scrutinised for centuries.
Prof. Delia said ethics and morals saw their meaning evolve in dynamic societies and it was important that they were reviewed from time to time.
Alessandra Viscovi, chief executive officer of Etica SGR, the Italian ethical investments pioneer, outlined how socially responsible investing was mindful of its positive and negative consequences on society. She mapped the growth of SRI funds in Italy which, at just €1.2 billion, clearly showed that there was a lack of information and understanding of their objectives.
Detractors often accused socially responsible investors of causing problems for portfolio managers but Ms Viscovi argued that they were more likely to reach their goals for the benefit of shareholders and society.
“The way we invest matters,” she argued. “We live on a small planet. Institutional investors have greater resources and they must do great things. There is no trade-off between socially responsible investment and performance – they are patient and non-speculative. The investments we make today will shape the world we live in tomorrow.”
Malta Financial Services Authority chairman Joseph Bannister underlined how most consumers were unfamiliar with ethical finance but there was a growing urge for a return to basics that was leading to a trend.
Refuting accusations that the regulator was too rigid or too cautious at times, Prof. Bannister conceded that the financial sector faced increased regulation but practitioners had to understand that the country’s reputation had to be protected. Consumers were responsible for their decisions, he cautioned, while the onus was on organisations to instruct their teams properly, particularly through training in ethics.
Prof. Delia delivered the presentation of Bill McKibben, author of ‘Play Nice, Make Money, Making the case for an ethical business model’ who was taken ill and was unable to travel to Malta.
“In the end, it all comes down to doing the right thing,” the broadcaster and journalist believes. “But can you make money from doing the right thing? I believe you can.”
He explains how with two academics, he set out to prove his theory through research of which there was little other than anecdotal evidence.
They found that seven in 10 Americans preferred to give their custom to companies which shared their values. Research also suggested that the more open and collaborative a business was, the more successful it was likely to be.
UK Sustainable Investment and Finance Association chief executive Penny Shepherd made a similar argument. She explained how 42 per cent of consumers surveyed said that if they could make money while making a difference they would.
Ethical investing, she added, was not only an option for the deeply committed but for everyone who sought to diversify their portfolios. It was particularly important in an environment of new thinking, which brought lobby groups like the Occupy movement calling for more responsibility and meetings like the Rio+20 conference earlier this month.
Mark Robertson, head of communications at the UK’s EIRIS Foundation, a not-for-profit research and investor services organisation, explained how investors were increasingly seeking to obtain more information. It was important businesses were more forthcoming with information but the quality of corporate social responsibility reporting still had a long way to go, he said.
Heightened consumer interest was resulting in a “shareholders’ spring” in the UK with many instances of voting against executive remuneration at HSBC and more recently at WPP.
F&C Investments’ director and fund manager Richard Mercado explained that to avoid the risk of “green-washing”, it was essential that screening and investment functions were separated for ethical investment to be carried out credibly. Ethical investment, he added, provided an extra layer of risk assessment.
Wolfgang Pinner, head of sustainable investments at Erste Asset Management GmbH, demonstrated how a socially responsible investment approach limited risk from hard-to-predict natural or human-made events. He compared the results to a best-in-class approach which was proven to help to identify opportunities.