Implementing ethical investment standards
How to carry out ethical investing without compromising either the best possible return or some highly cherished principles?
Thursday, July 22nd 2004, 10:16AM
by Rob Hosking
SsgA manages investments of about A$3 billion for New Zealand investors, including such clients as Tower, ASB, the Government Superannuation Fund, Bank of New Zealand, and a considerable number of community trusts.
The reo programme engages with companies on behalf of investors and tries to get those firms to lift their standards, instead of – as is more common with ethical investment funds – screening out firms which do not meet certain ethical criteria.
SsgA had looked at screening strategies or benchmarking against standards on the Dow Jones or FTSE, says SsgA’s manager of investor services Louisa Vincent.
“We had some problems with the construction of those benchmarks though – they were not entirely representative of the types of company we might want to buy into.”
In particular, they tend to be overweight in telecommunications and other technology stocks – which, in recent years, would not have been compatible with other investment goals.
“We’re very conscious of this being an issue for trustees of pension funds – they need to meet their fiduciary duties as well as ethical investment standards.”
The approach is to engage with the company over, for example, its recycling standards says ISIS Director of Institutional Funds Michel Bernard.
“We have a vested interest in not damaging company, he says. “It does not impact portfolio construction – if a manager thinks a tobacco stock is ok, we would do so.”
ISIS would then work with that company on issues such as the labour standards of growers, whether it marketed to teenagers, and whether it was involved in smuggling.
Rob Hosking is a Wellington-based freelance writer specialising in political, economic and IT related issues.
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