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Looking under the bonnet of ethical investments

Almost 17 million* investors potentially hold assets which would not meet their personal ethical preferences

14-10-2013 |

  • Only 20% of investors have an awareness of how ethical their investments are
  • Investors in personal pensions and stocks and shares ISAs are some of the least aware
  • Fewer than one in eight (12%) are aware it's possible to invest ethically in mainstream companies despite a broad range of available ethical funds
  • Analysis reveals that 54% of FTSE 100 companies and 111 of FTSE 250 companies operate in activities investors are ethically opposed to
 

Failure by investors to look under the bonnet of the funds they hold assets in is resulting in potentially 70% of investors seeing growth and returns from companies and sectors which, when prompted, they are ethically opposed to, according to new research from ethical investment provider Triodos Bank.

The data, released for National Ethical Investment Week (13-19 October), shows that on average, only a fifth of investors (20%) say they are aware of the true extent to which the activities that their funds / pensions or companies  invest in are ethical or not. And when breaking the responses down by investment type, Triodos Bank found that two thirds of those investing in personal pensions (68%) and stocks and shares ISAs (67%), plus just over half (53%) of those invested in a SIPP said they have little or no awareness. By contrast, those investing in offshore and onshore bonds were the most aware (46%)***.

Triodos Bank asked investors which activities would prevent them from investing in a particular company, fund or pension [see table 1]. The sustainable banking experts then analysed FTSE 350 companies and found that more than half (54%) of FTSE 100 companies are potentially active in these areas, including 12 mining companies and seven oil and gas companies. Within the FTSE 250 there are six arms and defence companies and seven companies involved in fracking**.

Table 1 - Which activities would prevent respondents investing in a particular company, fund or pension.

Human Rights abuses**** 74%
Pornography 56%
Arms / munitions 46%
Animal testing  40%
Tobacco   27%
 GM foods  16%
 Fracking (shale gas extraction)  15%
 Nuclear energy  13%
 Alcohol  11%
 Fossil fuels/oil/tar sands  9%


Huw Davies, head of personal banking at Triodos Bank commented: "Many of us will have a pension or some stock market investment and not realise that a proportion of our portfolio may be invested in those sectors we find personally distasteful.

"And if we are put off by investments in certain sectors, it's down to us all to look underneath the bonnet of our investments to ensure we are happy with how they are invested."

Women are more ethical but less aware when it comes to investment

Triodos Bank also found that women tend to have more ethical investment principles than men. While forced / child labour would stop just over two thirds (67%) of men from investing in a particular company, fund or pension, for women the number is just over three quarters (79%).

The gap becomes even wider with regards to investing in a more divisive industry such as pornography. Well under half of men (43 per cent) would have a problem investing in pornography, whereas 72% of women would object.

However, whereas 67% of men admit to being unaware of the activities of their investments, this rises to 73% of women. In fact only 18% of women say that they are aware of the activities their investments are linked to. This means that a staggering 82% of women may be investing in funds that they morally object to.

Ethical business

With only 17% of investors believing in investment return at all costs and saying that achieving the highest possible return is more important than being ethical, there is clearly an appetite among people to see that their money is being put to good use as well as making profits for them. However, only 12% of people are aware that it is possible to invest ethically in mainstream businesses.

Triodos' investment research team updates its universe of investible stocks on a quarterly basis and, in contrast to other investment providers, aligned with its mission of 100% transparency, it publishes these quarterly changes. Investors may be surprised to learn some of the London Stock Exchange-listed companies that have been screened within the last three months and subsequently selected or not for Triodos' Socially Responsible Investment (SRI) funds.

Triodos Bank has two SRI funds (the Triodos Sustainable Equity Fund and the Triodos Sustainable Pioneer Fund) and an ethical Stocks and Shares ISA offering which enables investors to benefit from potentially attractive financial returns, as well as being safe in the knowledge that their investments are more aligned with their personal ethical concerns. Every investment decision for the funds is only made following a rigorous research and selection process which ensures investors know that their money is invested in companies which Triodos Bank considers the best sustainability performance.

The table below (Table 2) details which UK listed companies were recently researched and not included in the Triodos investment universe and the reason for this. These companies may be included in UK passive investment funds or default pension funds.

Table 2 - UK listed companies not included in the Triodos investment universe and why

 Not selected Reason
 Aviva (Insurance) Potential involvement with arms
 Legal & General Potential involvement with arms
 National Grid Involvement with nuclear / environment
 Unilever Animal testing / GM foods

Huw Davies added: 'Being ethical is clearly important to a lot of people and yet like the majority of people researched by us it can be hard to navigate these tricky waters to find a trusted provider that you can be sure is investing you money ethically.'

Notes to editors

For further information, comment or case studies, please contact:
Rachel Finlay rfinlay@teamspiritpr.co.uk 020 7360 7820
Vicky Robinson vrobinson@teamspiritpr.co.uk 020 7860 7825
Matt Flanders mflanders@teamspiritpr.co.uk 020 7860 7815
Lisa Stanley lisa.stanley@triodos.co.uk 0117 980 9721
Faye Holst faye.holst@triodos.co.uk 0117 980 9584
Will Ferguson William.ferguson@triodos.co.uk 0117 980 9770

About the research
4,039 people (aged 18+) were interviewed online on behalf of Triodos Bank by Opinium Research between 17 and  24 September 2013. Weighted to a nationally representative criteria. Of those. 1941 have some sort of investment product.
 * 70% of investors unaware of activities of their investments. 17 million figure based on survey sample of 4,039 UK adults, 1,941 of which were investors (48%). UK census data shows 50,371,000 UK adults, 48% of this which is 24,178,080 adults. 70% of this figure is 16,924,656.
 ** FTSE 100 and 250 analysed for businesses potentially involved in practices that people identified as being something they do not want to invest in. In addition to specific cases, such as defense, mining, oil and alcohol companies, this list included pharmaceutical companies that may be involved in animal testing and insurance companies that may be working with
arms manufacturers etc.
 
*** Figure based on combined onshore (47%) and offshore bond awareness (56%)
 
**** Figure based on Human trafficking (75%) and forced/child labour (73%)
 
About Triodos SRI funds
The funds are offered in the UK via SICAV I sub-funds. The UK share classes are offered in sterling. When comparing returns for these share classes to those generated for the Euro share classes offered to European investors, returns will be affected by currency fluctuations between Sterling and the Euro. In principle the fund does not hedge the currency risk of these investments.
 
The funds, managed by Delta Lloyd Asset Management, are both also available through the Triodos Ethical Stocks and Shares ISA. Investors can choose from distribution or capitalisation sterling share classes. The estimated Ongoing Charges are 1.25% for the Sustainable Pioneer Fund and 1% for the Sustainable Equity Fund. The minimum investment is £1,000 per fund. Triodos Bank is offering a discounted initial fee of 3% until 6 January 2014. There is a minimum lump sum top-up of £500 The value of investments and the income derived from them may go down as well as up and you may not get back the amount originally invested. Past performance is not necessarily a guide to the future.
 You should not interpret any information in this press release as financial advice. Any investment decision should only be made on the basis of the Prospectus or the Key Investor Information Document(s) and not on any information in this press release.
The funds are offered in the UK via SICAV I sub-funds. The UK share classes are offered in sterling. When comparing returns for these share classes to those generated for the Euro share classes offered to European investors, returns will be affected by currency fluctuations between Sterling and the Euro.

About the Triodos Bank Ethical Stocks and Shares ISAs
Triodos Bank's Stocks and Shares ISA offer the opportunity to invest tax-free in our two Socially Responsible Investment (SRI) Funds. Customers are able to choose to invest in either one or both of our SRI Funds enabling customers to choose how their tax-free investments are being used. The maximum tax free ISA allowance for 2013-2014 is £11,520, if you haven't used your ISA allowance for this year. The favourable tax treatment for ISAs could change.


About Triodos Bank NV

Triodos Bank only finances enterprises which create social, environmental or cultural added value. Key sectors include organic food and farming, renewable energy, social housing, and fair trade. Transparency is a core value and Triodos publishes details of every business it lends to.  A range of personal savings accounts is offered, and full banking services are available for businesses and charities. Triodos Bank is an independent bank founded in the Netherlands in 1980. Its principles and independence are protected through a special shareholding trust. The UK office opened in 1995 and is based in Bristol. Triodos Bank offers a range of personal savings accounts as well as other investment opportunities.

 

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