Thursday, November 4, 2010

Ethical Investing - part 1

A few years ago PPI’s former group was holding an investment seminar for clients in Bali. A fund manager from London was proudly illustrating his choice of stocks for one of the funds he managed. When he told the audience he had chosen a major tobacco company as part of his portfolio a lady stood up and said words to the effect that he should be ashamed of himself. As he stood in a state of semi-shock she explained that her husband had died as a direct result of smoking and now she was being told that she should invest in the industry. The fund manager, normally shielded from the end users of his funds, had come face to face with the issue of ethics in investing.

In fact, socially responsible investing or SRI, dates back to 1798 when the Quakers prohibited members from participating in the slave trade. In more recent decades protesters have campaigned against polluting chemical companies, demonstrated against companies operating in South Africa during apartheid and have had a considerable influence on the activities and even financial standing of many enterprises.As a general rule, socially responsible investors support corporate practices that promote environmental awareness, consumer protection and human rights and avoid any company involved in alcohol, tobacco, gambling or weapons. 

In the UK in 1985 Friends Provident launched the first ethically screened investment fund. It excluded tobacco, arms, alcohol and oppressive regimes. Since then scores of ethical funds have emerged around the world to meet the demands of investors who want to have a say in the ethics of assets in which they are investing. It is estimated that in the UK alone some GBP6.7 billion is now invested in ethical and environmental funds.

BP’s recent oil spill in the Gulf of Mexico gave rise to a storm of protest against the oil Industry. To demonstrate his decisiveness in controlling the situation President Obama ordered a six month moratorium on all deep sea drilling. Investing in oil had lost its glamour. But as a result of the moratorium thousands of oil workers were put out of work and oil production in the US will suffer as a result. Do the protesters not think things through and realise how much they depend on oil in their daily lives? Perhaps they just want to see the dependence on oil replaced by newer and cleaner forms of energy. But who are the leaders in these fields? You guessed it – the big oil companies!

And what if tobacco companies shut down overnight in countries like Thailand ? The livelihood of millions of people who are employed in the industry would be destroyed. Of course, a counter-argument would be that they could be redeployed to produce more useful crops and help alleviate the inevitable food shortages that lie ahead. A noble thought, but it would take a massive effort on the part of the government and a huge culture shift to achieve this.

Part 2 will take a look at some of the other items targeted.

Written by guest contributor -    

Eric Jordan
Managing Director
Professional Portfolio International Ltd.
209/1 K Tower, Tower B, 19th Fl., Unit 4
Sukhumvit 21 Rd.(Asoke), Klongtoey Nua
Wattana, Bangkok 10110, Thailand
Tel   +662 664 0968;  +662 664 0145
Fax  +662 260 7769 

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