Investors in ethical funds have been happy to open their morning newspaper over the past 4 months. What is the reason?
Because most ethical investments seek to avoid the oil and gas business, and have been untouched by the great black slick of misfortune that has befallen BP, since the Deepwater Horizon rig exploded on to the front pages on 20th April.
The oil slick ran to 1,000 barrels a day by 26th April and had reached 5,000 barrels a day 3 days later, reaching the Louisiana shoreline with a spill surface of 4,000 square miles, on 30th April.
The Deepwater Horizon slick was finally capped after 38m gallons had spilled into the Gulf of Mexico, dwarfing the 11m-gallon slick from the Exxon Valdez in Alaska’s Prince William Sound in 1989.
A better advertisement for ethical investment was scarcely imaginable.
Any investment funds with exposure to BP were hit hard, as the company’s share price sank to the bottom of the Gulf of Mexico. Pensions experts calculated, in fact, that a UK pensioner with a potential annual pension income of £15,000 would have seen £400 of that wiped out by the slump in BP’s share price, which tumbled from around £6.50 in April to almost £3 in July, wiping £50bn off the value of the company.
Ethical Funds Investments became possible in 1971 with the launch of the PAX fund in the US, which avoided any companies benefiting directly or indirectly from the Vietnam War.
With their ethical policy, many ethical funds investments were bypassed by the banking crisis of the last five years, due to their low exposure to financial companies, while other ethical funds investments were sheltered from BP and have also been enriched by the recent news that renewable energies – one of the focal points for ethical funds – delivered over 10% of all energy in the EU for the first time.
Ethical investments target only stocks and companies which meet various criteria relating to ethical behaviour. Some ethical funds have an ethical policy based on negative screening, defining the activities, products and companies they exclude. These might include animal testing, deforestation, meat, nuclear power, pollution, tobacco, military and weapons, genetic engineering, exploitation of workers, and oppressive regimes.
Other ethical investments use positive screening, to invest in biodiversity, sustainable forestry, environmental products, green transport, charity work, renewable energies, and water management.
