Firms, and Investors, Giving More Attention to
NEW YORK, 20 JAN. 2001 (ZENIT.org).
Growing concern about the effects of globalization has forced
companies to pay more attention to the ethical consequences of their
actions. Questionable conduct can result in bad publicity and lost
Now, it can even lead to a lack of capital, as a growing number of
investment funds have begun to channel money to firms seen as ethically
Two of Britain's biggest charities, Oxfam and Christian Aid, for
instance, are switching their joint pension fund to invest on an
"ethical" basis, The Telegraph reported Jan. 13.
Martin Tyler, finance director for Christian Aid, said: "Christian
Aid has been looking for a proactive approach to the management of our
pension fund which is socially responsible and provides a close match
with our own ethical criteria while staying within pension trust
The charities say their new "socially responsible" pension
fund will invest in questionable companies only if they demonstrate a
commitment to improve their impact on society and the environment. The
fund will begin with £50 million of assets.
Ethical Investment Research Service reports that the amount of money now
invested in ethical funds stands at £3.3 billion, up from £2.6 billion
in December 1999. That is a 27% increase, compared with a 10% rate of
growth for unit trusts as a whole.
And ethical investing doesn't mean having to settle for low returns, the
Telegraph pointed out. In fact, the average ethical unit trust has
performed better than the average unit trust over both one- and
five-year periods. An investment of £1,000 in the average performing
ethical trust over five years would have grown into £1,889, 14% more
than the average unit trust, which managed £1,632 over the same period.
Within the broad concept of ethical investing a number of options exist.
Fund managers can be told to exclude companies involved in specific
activities such as arms sales or tobacco. Or they can be instructed to
invest only in firms meeting certain positive criteria. Another way of
investing is encourage companies to improve their ethical, social and
Many types of religious funds invest according to moral principles,
explained a Dec. 14 article published on the site of The Street.com.
There are now at least 22 religious funds, up from one just 10 years
ago, according to the Morningstar database.
A recent addition is the Azzad/Dow Jones Ethical Market Fund, launched
in October. This fund, together with Amana Funds, invests according to
Islamic principles, which require investors to share in profit and loss,
to receive no usury or interest, and to avoid investing in companies
involved in activities that run counter to Islamic principles. The
latter would include businesses involved in pornography, gambling and
pork processing. It would also include interest-based banks or financial
Amana Funds launched its first fund in 1986 and was for a while one of
the only U.S. mutual funds to manage money according to Islamic
principles. Investment in Islamic mutual funds in the United States has
been limited so far—Amana's two funds amount to
only $50 million in assets. But an Azzad fund manager hopes to have $100
million in assets under management in the next 12 months.
For Catholics one option is the Aquinas Funds, which invests only in
companies that promote Catholic values. Aquinas also participates in
shareholder activism, trying to get companies to change their policies
to reflect Catholic teachings. Aquinas Funds president Frank Rauscher
says the company's areas of interest include issues such as abortion,
contraception, gender and race discrimination, military weapons of mass
destruction, and affordable housing. One example Rauscher cites is
Whirlpool, which he says stopped donating to Planned Parenthood because
of pressure from Aquinas.
The number of investment products in the United States designated as
ethical more than tripled from 1995 to 1999, and funds in this category
grew to $174 billion from $12 billion, according to the Aug. 14 issue of
Companies announce ethical guidelines Recently a number of oil and
mining companies, long a target of protests both by environmental and
human rights groups, proclaimed their support for an initiative aimed at
reducing human rights abuses at facilities in developing countries.
Seven leading U.S. and United Kingdom oil and mining companies—Chevron,
Texaco, Conoco, BP Amoco, Shell, Rio Tinto, Freeport MacMoran Enron—will
follow a series of voluntary principles intended to ensure that
companies act to stem abuses by public or private security forces
protecting company operations, the Financial Times reported Dec. 21.
In the past, oil and mining companies have come under sharp criticism
from human rights groups for killings carried out by security forces in
countries such as Nigeria and Colombia. The ethics initiative was
launched in 1999 by the U.S. State Department and the British Foreign
Office, and is the first time that human rights groups, governments and
companies have worked jointly to draft principles for ethical corporate
Then there is Nokia. The Finnish maker of mobile telephones has
announced a project to help children with learning difficulties. The
company has entered into a global partnership with the International
Youth Foundation, to provide teaching packages to children, and to offer
volunteers from its own work force, according to the Financial Times on
The campaign is operating in South Africa, China, Mexico, Brazil and
Germany, as well as in the United Kingdom. Nokia plans to spend $11
million on the campaign during the next three years and says it should
help up to 1 million children and young people.
Ethics and business A Financial Times editorial Nov. 7 observed that
globalization and the age of the Internet mean that while multinational
companies are the norm, their operations are subject to increasing
scrutiny. They cannot escape the attention of pressure groups seeking to
impose moral standards on their activities.
Moreover, the editorial quoted Mark Malloch Brown, administrator of the
U.N. Development Program, who argues that big business, civil society
and development agencies have a common interest. This is so, partly
because "poor communities make poor markets and poor
employees," and partly due to a desire for "good, accountable
governance" in developing countries.
By this line of thinking, successful economic development is intimately
bound up with the rule of law and the strength of institutions that make
for a healthy democratic society. Companies, therefore, increasingly
recognize that they have a vested interest in stable, healthy
communities. And investors in also need to ensure they are operating in
a secure political environment.
Yet, the Financial Times noted, many pressure groups and aid agencies
involved in development have grave doubts about the benefits of
globalization and the role of multinationals. Many companies, meanwhile,
have yet to be convinced that they can or indeed need to cooperate with
such partners. ZE01012022