Retail fund managers
This page is designed to introduce fund managers to the
services and research EIRIS provides and gives
practical advice for anyone considering launching a socially responsible or
ethical fund.
Five steps to consider before launching a socially responsible retail fund
EIRIS services for the managers of retail funds
How do other fund managers approach responsible investment and make use of EIRIS research?
Introduction
EIRIS
has more than 20 years’ experience in helping people invest according to their
principles or concerns. We are the
Five steps
to consider before launching a socially responsible retail fund
1. Do the market
research
You will find there is a large untapped demand for some kind of responsible
investment option.
Identifying the precise nature of the demand is likely to strengthen your hand
in internal discussions. Most opposition to the idea will melt away once
colleagues are made aware of the speed at which the socially responsible
investment market is growing.
2. Decide your practical approach
Some funds are described as ethical or socially responsible because they do not
invest in companies that conflict with their ethical policy; some deliberately
invest in companies which undertake positive activities of which they approve,
while others manage to combine the two. In addition others add a third
dimension – direct engagement with companies in an attempt to improve their
social, environmental or ethical performance. Your decision on the approach the
fund should take will affect the marketing of the fund, the kind of people it
attracts, and the market sector and even the size of companies in which it
invests. If you are going for a mixed approach, does that mean there should be
some ‘required’ positives for any investments? Should there be a pass mark
before you invest, or should you just invest in the most ethical company in a
given sector (best of sector approach)?
3. Decide your ethical stance
What issues are you going to focus on? Should your fund be concerned about
issues such as alcohol, tobacco or pornography, or global problems such as
human rights and the environment? What are the core environmental, social and
other ethical issues of your fund? Again, the answers to these questions will
partly depend on market research from your target audience, partly on the core
values of your company, and partly on the need to balance risk and return.
4. Decide how you select stocks
Are the rules you set up clear enough to decide which stocks to invest in? You
need to consider how often you wish to make judgements on a case by case basis,
who is going to do this and how those decisions can be justified.
5. Build in mechanisms to deal with
change
The ethical views of society change and technological innovation can create
fresh ethical dilemmas. Genetically manipulated food, for example, has forced
environmental funds to develop new ethical policies. How will your fund take
these decisions? Will you consult your investors and if so, how? If you set up
an ethical committee to guide you, who should be on it?
EIRIS
services for the managers of retail funds
EIRIS
can help managers of pooled retail funds:
·
set up a fund that fits
their financial and marketing needs and takes into account social and
environmental factors (i.e. a fund based on a responsible investment policy)
·
select companies that meet
specific social and environmental criteria
·
monitor the social and
environmental performance of the portfolio
·
gain more detailed
information on individual companies
·
liaise with companies on
social and environmental issues of concern to the fund
·
keep abreast of
developments in the rapidly changing field of socially responsible investment
Go to
EIRIS services for investors
and investment managers to find out more
about how EIRIS can help you create an SRI fund.
"The work of EIRIS has proved invaluable to many investment
institutions entering the market".
David Brickley, Investment Technical
Manager, AXA Sun Life
"EIRIS has played a major part in
the development of ethical investment by providing essential information to the
industry which it is hoped will continue to influence companies to adopt a more
concerned and caring attitude in their operations".
Charles Jacob, MBE, FBIM, FRSA
Lecturer and originator of the first UK Ethical Unit Trust (Stewardship Trust)
How do other fund managers approach
responsible investment and make use of EIRIS research?
AEGON
Asset Management (Scottish Equitable)
AEGON Asset Management is the investment arm of AEGON
In 1989, when Scottish Equitable launched the
Ethical Fund it conducted its own ethical research, but began to look elsewhere
for third party screening services. In 1991 it started talking to EIRIS. A
relationship quickly developed, and this has now lasted over fifteen years.
Charles Henderson is the Head of Socially
Responsible Investment (SRI) Research at AEGON Asset Management. "Over the
years we have developed a good relationship with EIRIS", he says.
"When we first began outsourcing research to them we would simply ask for
a clean list of investment stocks. This was appropriate for a negatively
screened fund. We now regularly use them as a sounding board for what we've got
and for funds under development. We have to consider our clients and EIRIS
helps us to do that".
"EPM is a very useful addition to our
toolbox", Charles Henderson continues, "it enables me to use all the
tools that are appropriate to my main task more effectively. Rather than
reinventing the wheel by recruiting another four or five people to cover a lot
of issues, I have got access to all this information in a very user-friendly
format."
"Furthermore, when trustees come to us
looking for help with their Statement of Investment Principles (SIP) regime,
EPM enables us to work with them to consider the most appropriate
approach".