Ethical Performance
inside intelligence for responsible business


An investor’s guide to ethical and socially responsible investment funds

June 2005

Consultant editor John Hancock. Kogan Page. 320 pages, £55 hardback

Three well-known organizations in the socially responsible investment field in the UK have come together to produce this book. Ethical Investment Research Services, the UK Social Investment Forum, and Friends Provident Life and Pensions, which launched the UK’s first ethical fund 21 years ago, have all sponsored and contributed to a publication edited by John Hancock, who has written extensively on ethical investment.

This impressive team has set itself the task of assembling ‘the whole gamut of information on ethical and socially responsible investment between two covers’. On the whole the contributors, who have decades of experience between them, cover the retail market very thoroughly, although inevitably there are some gaps.

The book does a good job of answering the old chestnut: what about financial performance? Hancock concludes that ‘the evidence seems to show there has been no significant long-term performance disadvantage in investing in a socially responsible manner in the past’. As with other types of pooled investment, the quality of the fund manager ultimately dictates the quality of the return: Friends Provident often markets its Stewardship Income fund on the investment credentials alone.

Hancock also observes that for individual investors, at least, the question rather misses the point: ‘research into ethical investor opinions has confirmed that ethical aspects are equally important, or more important, than performance for all but two per cent of ethical investors.’

He has done a valuable service in gathering dispersed information on SRI into one place. The main weakness is the focus on investment risk as opposed to opportunity – put another way, on avoiding bad companies rather than investing in what Henderson Global Investors calls ‘industries of the future’. France, where the emphasis is on sustainability and there is little negative screening, fails even to get a mention in the otherwise comprehensive index. But then this is a book focused mainly on the UK, where churches and charities have played an important part in SRI’s development.

Alistair Townley


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