Ethical Performance
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City begins to feel heat on ethical investment

March 2001

Fund managers are feeling greater pressure to adopt socially responsible investment principles but are ill prepared to do so, a Deloitte & Touche study has concluded.

A telephone survey of 80 UK fund managers found that large funds were coming under more pressure than smaller ones, with 62 per cent of managers of funds valued $14.5-$145billion (£10-£100bn) saying they were experiencing a medium or high level of interest in SRI, compared with only 27 per cent among managers of funds of less than $14.5bn.

A large proportion (41 per cent) said they would work on SRI through active engagement rather than by applying positive (22 per cent) or negative screening (22 per cent), while the rest said they would use a combination of these approaches.

Around two-thirds said they expected interest in SRI to increase, while none could foresee a decrease.

However, the majority of those who said they expected increased interest in SRI also said they had made no decision on how they would measure the success of the strategy they would adopt on SRI – and most of the rest thought some form of measurement was not even applicable.

Deloitte & Touche researchers concluded that measuring the effectiveness of SRI ‘seems to be an issue which the industry has not yet addressed’, and added: ‘Without measurement it is difficult to see the justification for investing in the engagement process, which is potentially far more resource-intensive than screening.’

Chris Burgess, leader of environmental and sustainability services at Deloitte & Touche, said: ‘It seems clear that many fund managers have not thought through the implications of this approach or addressed how they intend to measure their success in influencing corporate behaviour’.

Tom Osborn-Baker, chief investment officer at Deloitte & Touche added that the survey suggested ‘the practical application of SRI is falling well short of the original political aspirations’, but claimed this was not surprising, given that many funds did not have the time or resources ‘to run their scheme any differently’.

More than 50 per cent of funds covered by the survey were either already in the SRI market or recruiting SRI specialists, training in-house managers or ‘outsourcing’ their SRI requirements to third parties.

In a separate initiative, Business in the Environment is to publish a survey looking at the attitudes of city analysts, fund managers, investor relations managers and the financial media to SRI. Results should be published in May.


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