Become an expert
This page will help financial advisers who are interested in knowing more about ethical or socially responsible investment (SRI). It contains some useful tips on how to go about becoming an expert in the field.

Ethical investment: some basics

Practical steps for advisers interested in SRI

EIRIS Green and Ethical Funds Directory

List of UK ethical retail funds currently available

SRI news via email


 Ethical investment: some basics
There are many options available to clients who wish all or part of their investment decisions to be influenced by ethical considerations. These include direct equity investment, unit trusts and other pooled funds, pension funds, endowment policies, ISAs, cause-based investments and a variety of accounts offered by some banks and building societies.

There are currently scores of ready-packaged ethical/socially responsible investment funds available to individual investors in the UK.

In choosing an appropriate ethical fund your client should decide on the approach they prefer for the selection of investments, as well as the issues that matter to them. No two ethical funds take exactly the same ethical standpoint. Some concentrate on selecting companies according to positive criteria such as environmental initiatives, while others use negative criteria such as military involvement to identify companies in which they will not invest. A third type of ethical investment tries to balance the two approaches, while others add a further dimension – direct engagement with companies in an attempt to improve their ethical performance.

Some banks and building societies, such as Triodos and the Co-operative Bank have an ethical policy for those seeking ethical current or savings accounts. See Banking for further information.

Surveys have demonstrated an increasing demand for ethical investment among the general public. The rapid growth of ethical investment over the last twenty-five years has been fuelled by awareness raised by the media and campaign groups. A change in the law concerning pensions has also seen a move towards ethical consideration. In July 2000, an amendment to the 1995 Pensions Act now requires pension fund trustees to state their policy on social, environmental and ethical issues. See Pensions for further information.

Studies of ethical investment funds have generally not identified a consistent "cost" to ethical investment, and some have identified out-performance for various approaches over different time periods. EIRIS research on the longer term performance of UK unit trusts, found that they appeared to have lower total risk than other funds with the same financial objectives and geographical focus. Although on average they also had slightly lower returns, the position was quite diverse, and a number of the funds had done relatively well over significant periods of time. See Does Ethical Investment Pay? for more details of this research.


 Practical steps for financial advisers interested in SRI
Below are some tips on how to meet the needs of your clients.

  1. Always ask the "ethical question"
    The simple question "do you have any social, environmental or ethical requirements?" may prevent you from losing many sales opportunities. Research has shown that many investors simply aren't aware they can invest according to ethical criteria, and only reveal their concerns when prompted. Without asking the "ethical question" can you say you really know your client?
  2. Do your homework
    Clients interested in investing according to ethical criteria will have widely differing needs based on their personal concerns and priorities. For example, one client may wish to avoid companies involved in animal testing, whereas another client may be more interested in actively supporting companies with a good track record on the environment. You will need access to detailed and up-to-date information on pooled ethical funds as well as the ethical performance of individual companies. A Directory of Green & Ethical Funds can be downloaded here
  3. Ask questions of the funds
    Many of your clients who are interested in investing according to their principles will want to know how the fund(s) they choose to invest in select their stocks, and the mechanisms in place to ensure the ethical policy is adhered to. These are valid questions to put to the fund managers. Earlier on this year the European Sustainable & Responsible Investment Forum (Eurosif,     www.eurosif.org) launched a set of transparency guidelines for European SRI funds to disclose key information, such as engagement practices and criteria selection, to help investors make informed choices. They are currently being piloted by a number of funds across Europe.
  4. Keep in touch with the latest developments
    There are numerous information sources on SRI developments, particularly via the internet. EIRIS produces a free monthly email news bulletin for advisers to keep them abreast of the latest developments in the SRI field. See     SRI news via email  below for further details. The Ethical Investment Association is a network of advisers with expertise in ethical investment that meets quarterly to discuss the latest issues. In July the UK Social Investment Forum (UKSIF) launched its Retail Revolution programme which includes developing guidelines and a toolkit for financial advisers.
  5. Consider including an SRI specialist in your team
    Socially responsible investment can be a complex area. Advisers offering such advice really should have a good understanding of the main ethical issues, as well as an informed knowledge of the range of ethical products available to clients. If you are not working alone it is a good idea to have an SRI specialist in-house, perhaps someone who is already interested or experienced in this field.


SRI news via email
EIRIS provides a free e-mail news bulletin service for financial advisers. The EIRIS Financial Adviser Bulletin comes out on a monthly basis and aims to be short and concise with contact details where possible to find out further information. It covers news related to developments in the socially responsible or ethical investment world, including new products and published research. Click here to download the latest edition. 

If you would like to subscribe to the EIRIS e-mail bulletin service contact Mark Robertson on 020 7840 5703 or e-mail him at mark.robertson@eiris.org