Ethical Performance
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nanotech 'needs care'

November 2005

Corporate risks associated with nanotechnology could soon become a significant socially responsible investment theme, the research firm Innovest has declared.

The warning comes at a time when global investment in nanoscience is booming, with BASF and General Electric among companies to the fore. Research and development spending on nanotechnology - the manufacture of objects built from individual atoms and molecules - was an estimated $8.6billion (£5bn) last year, and nanotechnologies are predicted to bring sales of $1trillion by 2015.

Innovest expects a flood of new nanotechnology products in the next three to five years and warns companies involved to tread carefully to avoid a consumer backlash similar to that against genetically modified crops. To date, the health, safety and environmental risks are unclear. Early studies suggest that some nanoparticles might damage living organisms, and there are worries about toxicity. Innovest says public awareness of nanotechnology is increasing, albeit slowly, and that one warning signal for investors is a recent growth in interest among pressure groups. Last year only four campaign groups were known to be interested in nanoscience, but 16 NGOs, including Greenpeace, recently contributed to a discussion document on the topic submitted to the US Environmental Protection Agency.

'Our advice to companies is twofold,' said Heather Langsner, a senior analyst with Innovest and author of a new study on the topic. 'They need to be transparent about the risks associated with nanotechnology and quick to explain its benefits.'

Innovest also believes nanoscience is too closely focused at present on improving existing products rather than developing socially beneficial technologies. More research in areas such as clean water processes or mechanisms for mass vaccination would allay public criticism and offer clear business benefits, it says.

One company taking this route is General Electric, which is using nanotechnology to create energy-efficient semiconductor diodes. Such devices, which could one day be used in home lighting, are expected to grow into a $1bn business by 2008. The US conglomerate is one of 15 large and small companies in a new Innovest list of nanotechnology best practice.

Innovest's study is one of the first signs of increased investor interest in the topic as an SRI issue. Nanotechnology remains largely off the agenda even for socially responsible funds, although UK-based Jupiter and the German insurance group Allianz have both recently produced analyses of the sector.

Innovest has expanded its research capability by acquiring from DNV the non-solicited company ratings services of the research provider CoreRatings. DNV is retaining the CoreRatings name and corporate services business to focus on mandated corporate governance and corporate responsibility ratings.

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