SRI spurred on by crunch

The current economic crisis is increasing demand from investors for socially responsible investments (SRI) according to Oxford Management director Oliver Graham.

Graham, who oversees management of the firm’s recently launched Oxford Sustainable fund, said that following discussions with individual investors and institutions he has noticed a more thoughtful approach, a trend he says has been kick started by the credit crunch.

Graham said: ‘Investors have different reasons to want to increase their sustainable assets. First, many feel that the era of short term gains is over. Certain activities in the market have given capitalism a bad name and brought it to the brink of collapse and investors are reviewing their portfolios accordingly.

‘Second, companies with a comprehensive SRI policy tend to consider their actions, the future and their company’s role within it more intelligently.  Investors want to be a part of such companies, which have historically outperformed their peers. Third, there will be an asset manager shake out. Pension fund trustees, facing black holes, are reviewing their asset managers and new mandates will include a greater emphasis on SRI Assets.’

According to recent statistics from the Investment Management Association ethical funds saw net retail net inflows of £54.8 million in the fourth quarter of 2008, up from £20.5 million the previous quarter.  Total net retail sales for ethical funds for the whole of 2008 were at £152.4 million.  

Chief investment officer of Zurich-based firm Sustainable Asset Management, Christian Werner, agreed saying that the current financial crisis is definitely accelerating this growth of sustainable investing.

He said: ‘The banker people trusted in the past with their money has turned out to be a normal salesman. This will definitely make them think much more about who they invest with and this is what sustainable investing does.

‘What we see is a massive crisis of trust and mismanagement of the resources in the banking sector; of money and other areas and this is something people understand much more than they understood before. How deals are done and the levels of transparency is something that people will look for much more in the future.’

Cheviot’s head of ethical investing, Paul Sexton, who was recently hired to manage client's growing interest SRI, also agreed that investors are showing more interest in the area, however he feels it is a long term trend which can only partly be attributed to the financial crisis.

He said: ‘The credit crunch means that people are revaluating their portfolios and as a result of that more people are trying to make positive investment choices.

'That said I think people’s awareness and interest in how they can make more ethical investments has been on the rise for some time as investors have become increasingly aware that they can make a difference.’