GOOD MONEY WEEK: What’s the colour of your money?

Written by Lisa Stanley Mann on 30th October 2016

Stiffkey Blue. No, not the colour for new fisherman’s overalls, but the latest on-trend colour from Farrow & Ball. (Almost the colour of my living room – we went for the more indigo Drawing Room Blue instead, FYI.)

You can have any colour you bloomin’ well please when it comes to walls, furniture, shoes, handbags, jumpers, cars… whatever, but ask for the same degree of choice when it comes to your investments: it’s just not there. It’s grey. Light grey or dark grey, maybe, but basically, grey.

According to new research from Triodos to mark Good Money Week, UK investors would LOVE their money to make a positive contribution to society and the environment, however, according to the stats there are few options available for those looking to choose from the responsible investment spectrum.

62 per cent said they would like their money to support companies which are both profitable and make a positive contribution to society and the environment58 per cent think people should invest their money where it can support companies that make a positive contribution to society, to people and the environment. 47 per cent believe that companies trying to make a positive contribution to society and the environment are more likely to succeed in the long term. 

BUT 51 per cent have never been offered the option of investing in Socially Responsible Investment (SRI) funds.

If there is truly a demand for it, it begs the question: why? Some terribly sceptical folk would say it is because it is more work for advisers to have to determine the ethics of a fund or stock, in addition to all the work they already have to do on risk and return.

Some still more sceptical folk would say it is because in the financial services sector, many a pocket is lined with the profits of large companies that would not meet even the most basic ethical standards, because they extract oil or rely upon cheap labour in Bangladesh. Why bite the hand that feeds you?

The survey findings also challenge the perception that ethical funds are less profitable than mainstream investments, as survey respondents see investing in sustainable and ethical funds as ‘smart investment’ and nearly half believe that companies trying to make a positive contribution to society and the environment are more likely to succeed in the long term. Indeed, over the last three and five years the FTSE All World (ex-fossil fuel) has outperformed the FTSE All World index, and this year the MSCI SRI index has outperformed the MSCI World index (YTD).

Colour of Money

John Ditchfield, partner and financial adviser at Castlefield Advisory Partners, said: “With the growing appetite for sustainable and responsible investment, we welcome the Triodos Sustainable Pioneer Fund to the market, where a specialist team has carefully selected some of the world’s most pioneering businesses. Investing in SRI delivers benefits to society and environment while making a good return, and these types of sustainable investments funds are also likely to thrive in the long term.”

The Socially Responsible Investment (SRI) market is now worth more than £15 billion in the UK, up from £12.2 billion over the last three years. The total investments in the UK amount to £1 trillion.

Huw Davies, head of retail banking at Triodos Bank UK, said: “Many investors now believe that good long-term returns can go hand-in-hand with sustainable and ethical investments. Our research reveals that a majority of investors now want sustainable and ethical investment options, and the industry must respond to this demand. Recent growth in the SRI market is positive and we want to see that growth accelerate to have greater impact in addressing social and environmental issues.

The Triodos Bank Sustainable Pioneer fund is a global equities fund investing in small and medium-sized listed companies – for example, leading wind turbine manufacturer, Vestas, medical equipment manufacturer Smith and Nephew, and bicycle manufacturer Shimano – focused on the sustainable themes of climate protection, healthy living, clean planet or are pioneers in corporate social responsibility.

Investors are in the dark on where their money is invested: and call for greater transparency

Many investors are in the dark about where their money is invested, with nearly half (47%) saying they do not know which companies or industries are supported by their investments.

Investors want banks and the financial industry to be more transparent, and also offer more SRI options

Investors call on banks and other financial providers to be more transparent when it comes to disclosing where their money is being invested and also offer more SRI options.  48% of investors think that it should be standard that customers are made clearly and fully aware where their money is being invested.   More than half (53%) think everyone should be offered socially responsible, or ethical and sustainable options as standard in auto-enrolment workplace pensions.

Mr Davies added: “We see a growing awareness among investors that their money has an impact on the world in which we live through how it is used by banks and funds. We want to call on all banks and financial providers to be more transparent and open about where they invest people’s money, so that investors can make informed choices.  As a values based sustainable bank, Triodos Bank enables money to be used for positive social and environmental change.

“We’re committed to transparency: our investors and savers know where their money goes.  Our customers can find out where their money is invested and lent via our website, they can see where their money goes and the benefits it brings to society and the environment at first hand.”