Ethical Performance
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Prudential occupies middle ground

October 1999

Prudential is to launch a ‘middle ground’ ethical fund in its pension range within the next couple of months.

The UK’s largest life insurer says the Light Green Fund will be designed to reflect the ethical and environmental concerns of existing pension scheme members ‘rather than criteria devised by a committee or advisory board’.

The Prudential says the launch of the fund is a recognition ‘that socially responsible investment is increasingly required as a pension scheme investment option.’

Andrew Gillies, head of product development at Prudential, said research among scheme members had shown that ‘the relatively strict investment criteria of some ethical funds can go beyond what many pension scheme members would regard as their own principles’ – and that the new fund would aim to reflect this.

The fund would aim to have a ‘strong ethical and environmental standpoint’, but would ‘also invest in a wider, less constrained universe of stocks’. He added that ‘adopting strict criteria can compromise investment performance and risk unacceptably high volatility of returns’.

The fund will be managed by the company’s inhouse fund management arm, Prudential Portfolio Managers, using screening provided by the Ethical Investment Research Service.

It is the first such fund to be marketed under the Prudential name, although Scottish Amicable, which the company owns, also launched an ethical fund in April.

The Scottish Amicable Ethical Fund has been criticised by some independent financial advisers – including the Ethical Investors Group and the Ethical Investment Association – for adopting what they see as a weak stance on ethical criteria.

But Gillies told EP the Prudential was merely reflecting the views of scheme members. ‘The Light Green fund is not going to satisfy those on the more stringent end of the ethical investment market, but everybody’s ethics are different,’ he said.

‘We think it will occupy some of the middle ground that is not being covered by other funds in this arena.’

Gillies said the fund would not, for instance, invest in companies that use animal testing for the cosmetics industry, but might invest in those that use animal testing for drugs.

The fund managers will also be able to invest in retailers that sell tobacco products – but not in the tobacco manufacturers.

Companies involved in alcohol or gambling will be included, which will avoid ‘the potential hypocrisy’ of the fund eschewing such investments while investors enjoy ‘the odd drink or punt on the National Lottery’.


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