by Jenny Ruth
Royal & Sun Alliance has launched a new retail unit trust which aims at socially responsible investing (SRI).
Tower offers an international ethical fund and offshore fund managers market such products here, but this is the first retail product investing locally in the field.
Ethical investment specialist Rodger Spiller, who did his doctorate on the subject and is involved in various organisations including New Zealand Businesses for Social Responsibility, will be advising the new trust on which stocks to pick.
He says ethical investment makes up 5% of all new investment in Britain and about 13% in the US.
Money invested in US SRI funds have grown from $US682 billion in 1995 to $US2.2 trillion in 2001 while British funds have grown from $US1.6 billion to about $US6.2 billion in mid 2001. Estimates of future growth suggest the British market might be worth $US14.5 billion by 2003, Spiller says.
In Australia, there’s at least $13.9 billion invested in SRI funds this year, up from $10.5 billion last year, he says. That’s 32% growth in a year in which total funds under management in Australia fell 0.1% in value.
And being a socially responsible investor doesn’t mean sacrificing returns. The Domini 400 Social Index, an SRI in the US run by Kinder, Lydenberg & Domini, consistently outperformed the Standard & Poor’s 500 index since 1990.
The Royal & Sun fund will hold about 25 stocks, at least 80% by value invested in New Zealand and the rest in Australia and will aim to outperform the Top 40 gross index by 3% before fees and tax. It will be managed by Royal & Sun’s Guardian Trust Funds Management subsidiary.
The trust won’t invest in any "sin" stocks including tobacco companies, alcohol manufacturers, gambling or gambling equipment companies or armaments manufacture.
The trust will also practice "constructive engagement" with companies it invests in to encourage them to improve their social and environmental performance.
Australian Shareholders Association research on who invests in ethical funds found 61% are female while only 41% of the general investing public is female. And the largest group of ethical investors are aged between 35 and 44, younger than other investors.
Other characteristics include religious affiliations, supporters of community groups and being members of the "caring" professions. Often those in ethical funds are often first-time investors and blue collar workers.
Royal & Sun is promoting the new trust as an opportunity for advisers to attract business from previously unfamiliar sources.
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