Upward Trend in Ethical Investing in the UK, More than Philanthropic Investment

At the EGA Retreat this year, we had a concurrent session about university endowments invested in the coal industry. Andy Behar, CEO of As You Sow Foundation, and Ellen Dorsey, Executive Director of Wallace Global Fund, led a fantastic skit with two students working to change their universities’ investment portfolios to be greener and more socially responsible.

The students were specifically working to change their universities’ investments from the coal industry, which of late has often been a poor choice of investment even from a profits standpoint, to investments in the green energy market, a greener, more socially responsible choice of investment for the student’s futures. The students, running into many challenges with their schools’ endowment fund managers, university chancellors, principles, and boards, were glad to have Foundation support in this new mission.

The students and foundations in this session provided an excellent example for this field, in which foundations could potentially have major impact in line with their overarching missions and goals: ethical investing. There have been ethical investment options available to investors for quite some time, and as shown in The Environmental Grantmakers Association’s 2008 publication, “Investing for Impact: A Snapshot of EGA Members’ Leveraged Investment Strategies,” EGA members have been aware of and involved in ethical investing for years. Only recently, however, has ethical investing gained momentum as a movement, with many different actors getting involved, opening a new door for foundation involvement as well.

According to research conducted in light of Ethical Investment Week in the UK, which just ended on Friday (10/20/12), there is a growing interest in ethical investments that is part of a broader movement to build partnerships toward positive social change. In fact, half of investors across a spread of industries now say that they want ethical investments to be part of their portfolio.

However, one reason ethical investing has been so slow in its emergence is the question of profitability. So, even if the desire is there to invest in more socially responsible markets, will investors actually be able to garner profit with these new ethical investment decisions, making this upward trend of socially responsible investing a sustainable and even growing market?

Well research for Ethical Investment Week actually shows that not only are these ethical investments keeping up with much of the mainstream market, some are actually well surpassing the standard expectations and proving to be better choices for their investors. The UK ethical investments market is steadily growing, with 11 billion pounds currently invested in the green and ethical investments market – 4 billion more pounds than 10 years ago.

The shift in ethical investing includes a multitude of types of investors, including charities, philanthropic organizations and socially responsible corporations that want to invest in ethical and profitable markets. This shift gained some substantial momentum after some of the recent banking scandals and continues to gain momentum, as Corporate Social Responsibility (CSR) becomes a more prevalent force. Philanthropy – Foundations’ own investment portfolios - is also joining the movement in the UK, as major donors put more focus on giving today.

So what does this upward trend in ethical investing show? It shows that a more aware, socially alert public attitude in the UK is leading to positive social changes. Businesses are either in the same mindset or are responding to this attitude change. Regardless, it’s good news for the future of ethical investing, for making profits with positive social impacts rather than harmful ones, and for society at large. Foundations can play a role by changing their own portfolios as well as by encouraging more ethical investing of other organizations, such as universities’ and corporations that are interested in taking on more socially responsible roles.

 Consulted works: http://www.xperedon.com/news_1812