Since the launch of the first dedicated ethical retail fund in the UK back in 1983, the amount of assets allocated to this sector has continued to grow – year on year figures published by EIRIS show the sector has both substance and support.
Institutionally the situation is similar; with the tweaking of pensions legislation back in 2000 the responsibility to think about the impact of environmental, social and governance issues achieved game-changing statutory context. Local authorities in particular have led by establishing discreet portfolios based on integrating ESG and focused on engagement. Faith and charity investors, likewise ‘get it’ as it integrates holistically with mission and objectives.
Thus the decision by two major investment houses to move away from dedicated in-house SRI teams in favour of broader non-specialist integration, looks , perhaps counter-intuitive, not least with the government’s growing exasperation with investors to take more of a stewardship lead. Any diminution in governance oversight looks particularly perverse just as the 2012 proxy season commences that will undoubtedly focus heightened attention on bonuses and pay. Aviva, for example, has said publicly that being a thought leader is costly, and doesn’t generate revenues – we would argue the opposite; without thought leadership you fail to build reputation, trust and following.
The investment industry is undergoing a lot of soul searching at present; accused of over-charging and under-performing, the big houses have seen record outflows in assets, suggesting customers are now more likely to shop around for product and performance – in our view this applies similarly to ethics. At Ecclesiastical we continue to see record inflows based on a clearly articulated product offer of ‘profits with principles’. We see clients looking for values, and managers that understand them. The death of SRI has been grossly exaggerated; we just think smaller, nimble houses with years of expertise do it better, because it’s what they do.
Small houses have dedicated followers, and are able to withstand the short-term focus that many big houses continue to operate by; the decision to withdraw from dedicated SRI provision is regrettable, but is more probably down to internal travails and cost-cutting; this can only benefit those smaller players for whom responsible money management is at the heart of what they do, rather than just one investment option among many.