Worldwise Investor values survey - an overview of the results
The values survey, which remains on-going, is conducted directly with investors and aims to understand what values investors have today.
Of respondents all were prepared to exclude companies as a result of their business practices, with only 2% of investors being happy to invest in companies involved in all types of business activities. Thus the sample constituted persons most likely to describe themselves as 'ethical' investors.
The top concerns of investors are the clearing of the tropical rainforests, unsustainable wood and industrial pollution. Whilst 69% of those surveyed are not concerned about the production of alcohol, and surprisingly to many 29% are not concerned about the production of tobacco. While many funds do include companies like Diageo in their portfolios, tobacco companies have been excluded by all ethical funds in the past.
The Environment dominates ethical issues
The top ten ethical issues are dominated by environmental concerns - 50% being environmental.
These environmental screens include:
- Clearing of tropical rainforests
- Manufacture chemicals without managing risk of adverse environmental effects
- Use high volumes of timber without complying with internationally recognised standards
- Companies which are responsible for unacceptable levels of pollution, or who have pollution convictions
- Companies involved in 'high carbon' fuels, with environmental toxicity issues such as Tar Sands (Oil Sands).
Investors used to be more concerned about tobacco, alcohol, armaments and pornography but as Mark Hoskin, Financial Adviser and Partner of Holden & Partners says: “Whilst these old Quaker issues are still important to many the old issues of vice are not the main issues of today. Consequently the ethical funds launched today don’t focus on these issues and indeed often don’t have any social screens.”
The Cheviot Climate Assets fund and the IM WHEB Sustainability fund are two examples of this trend. Both are managed by ex-employees of Henderson Global Investors (Claudia Quiroz and Tim Dieppe) who run a number of ethically screened funds and while they retain a good knowledge of ethical issues these are not the drivers behind stock selection.
Tim Dieppe, fund manager of the IM WHEB sustainability fund: “The environmental concerns highlighted by investors in this survey are driving significant change in the shape of the future global economy. We believe that companies providing sustainable solutions to social and environmental challenges present a very significant opportunity for long-term investors.”
Positive change is important to ethical investors
The top three positive screens for our investors were industrial processes which create efficiencies or lead to cleaner processes, renewable energy and ethical consumerism. 7 of the top 10 were environmental issues, with only the rights of indigenous peoples and executive pay featuring among the social issues for investors.
Climate Change will have a significant impact on future generations
The survey also reveals that 91% believe that climate change will have a significant impact on future generations; 91% believe that fund managers should take sustainability issues seriously and; 91% would like fund managers to consider environmental, social and governance factors in the investment process.
71% of respondents also revealed that they thought human activity was the principal cause of climate change.
Mark Hoskin said “Climate change and the financial crisis has had an impact on investors. Investors today may be more concerned about the environment and irresponsible marketing rather than simple Quaker principles and exclusions. Today many ethical funds hold companies like Diageo, perhaps one day we will see a tobacco company?”
However while investors recognise the cause of climate change as human carbon emissions, 49% of the same investors are not prepared to support nuclear as a positive investment solution. The conversion of many environmental scientists and the arguments of men like James Lovelock (in 'The Revenge of Gaia') to the cause of nuclear as one of our most important low carbon energy solutions has not filtered down to the ethical investor, with only 11% being keen, or very keen, on the nuclear solution.
Social Impact Investment
Most people would like their investment to do good and some would sacrifice returns to improve social impact and 24% said they'd like to help social impact causes, which looked to solve issues surrounding children in care, and re-offending rates or addicts
Respondents answered that they strongly agreed that:
- When investing I would like some of my money to do some good as well as provide me with a return 59%
- I would consider setting aside a small amount of my money to invest for the social or environmental impact to be the primary concern 42%
- On setting aside money for social impact, I’d be prepared to accept a higher risk and lower than normal market returns 25%
Take the survey and contribute to a greater understanding of how values influence investment
About the survey
The values survey is on-going, open to all and aims to be a part of an IFA’s advice process. It takes approximately ten minutes to complete and currently has 81 responses.