A commentator:
"There is no known evidence that demonstrates that ethical funds are any less or more risky than other funds, so it is not possible for the inclusion of such funds to "de-risk" a portfolio. It may spread risk if a client has a concentrated portfolio, but for anyone with a sensible spread adding an ethical fund will have little or no effect on the overall risk level. To suggest that the inclusion of ethical funds will, of itself, de-risk suggests such a lack of understanding of risk that it borders on the cavalier."
My Response:
"Thank you for your comment, but I am not sure you understand how we are using the term 'ethical'. If you take a look at the site you will see that we are looking at issues of sustainability and how the investment markets do not factor in long term resource and climate change impacts which make current assessment of what is risky slightly out of date. It is a bit like the financial crisis really, until the market values things like environmental damage and waste properly all investors are carrying more risk than they think and it could result in a slump in performance across the board at some time in the future. As an example of the extreme risk investors are carrying you should look at our site and read about the Carbon Tracker report on the risk that the FTSE 100 has investing in 'Stranded Assets'.
The investment community is not very good at taking a long term view on what is happening in the world, and prefers to look at risk in terms of historical models based on past experience. Our site is trying to highlight these issues before they become a matter of history and the subject of consensus. We perceive that the investment community may have fundamentally missed key market risks. BP is an example of what can happen in this situation, so to is the financial crisis. Thus by making statements such as 'ethical' can de-risk your portfolio we do not feel we misunderstand risk, but on the contrary have given it a bit more in depth thought than most of the intermediary community.
Indeed Mercers, the institutional investment advisers, seem to agree. They have reported that portfolio risk could increase by 10% in the next 20 years as a result of climate change and have recommended that at least 40% of an institutional portfolio should include investment in climate change mitigation and adaption. I see that so far you have not registered on the site. We would be delighted to have you join the community and engage on these issues."
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