Money With Values
Article by Wayne Visser
Ethical investment – also called social investment, socially responsible investment and green investment – is an international trend which refers broadly to the conscious use of investments to achieve social, ethical and environmental performance objectives, over and above the usual financial returns. The relevance of the ethical investment movement lies in its potential to deliver good financial returns while also helping to deliver on the countries social objectives, like empowerment, good labour practices, and environmentally sustainable development for instance.
Apartheid as a Catalyst
The phenomenon can be traced back to the beginnings of the corporate social responsibility movement in the United States in the 1930s, although it only really became visible in the 1970s. At this time, church and university groups set up the first funds, such as the Pax World Fund, to avoid investment which supported the Vietnam War and the Apartheid regime in South Africa. Since the political transformation of South Africa is widely regarded as one of the great motivators and success stories of ethical investment, this background is worth recalling.
Many would argue that it all began in 1970. South Africa had just been ejected from the United Nations for its apartheid policies, and Reverend Leon Sullivan proposed that this be reinforced by the adoption of a set of minimum standards by US companies with South African operations. These standards, formalised as the Sullivan Principles in 1977, included clauses on non-segregation of facilities on racial grounds, affirmative action for blacks, and social upliftment for underprivileged employees. Various civil rights, labour and religious groups took it upon themselves to monitor and report on companies’ adherence to these principles.
In 1982, Connecticut became the first US legislature to require all its investments to be screened against the Sullivan Principles, setting the precedent for similar action by other bodies. Then, as the South African regime toughened its stance on apartheid, complete disinvestment began. As a result of increasing stakeholder pressure and led by Citibank and Chase Manhattan Bank, 135 US industrial companies pulled out of the country between 1985 and 1987. Over the same period, the level of US Funds screened for South African links rose from less than $100 million to nearly $400 million.
Similar ethical investment forces were at work in the UK over the same time. Lobby organisations like Christian Concern for South Africa, End Loans to South Africa, and the Anti-Apartheid Movement, put tremendous pressure on the major UK banks (Midlands, Standard Chartered and Barclays) to withdraw from South Africa. There were also campaigns against users of South African gold and suppliers of oil to South Africa (especially Royal Dutch Shell). These were given added weight by the emergence of screened ethical unit trust and investment funds with avoidance criteria for oppressive regimes chiefly targeting South Africa. By 1985, South Africa was forced to default on its foreign loans, and in 1986 the US passed the Comprehensive Anti-Apartheid Act, with the European Community following suite shortly after to consolidate international financial sanctions.
Types of Ethical Investment
There are basically two types of ethical investment: shareholder activism and screened investments …
[button size=”small” color=”blue” style=”download” new_window=”false” link=”http://www.waynevisser.com/wp-content/uploads/2012/07/article_ethical_investment_wvisser.pdf”]Pdf[/button] Ethical Investment (article)
[button size=”small” color=”blue” style=”tick” new_window=”false” link=”http://www.csrinternational.org”]Link[/button] CSR International (website)
[button size=”small” color=”blue” style=”info” new_window=”false” link=”http://www.waynevisser.com/books/business-frontiers”]Page[/button] Business Frontiers (book)
Cite this article
Visser, W. (1997) Ethical Investment: Money With Values. Money Values online column.