Doing the bright thing

Arms manufacturing? Tobacco products? If these are not your investment bag, there are many ethical options.

Nowadays most of us invest in equities through unit or investment trusts. These come as pre-packaged, retail financial products. But there are plenty of alternatives for ethically minded investors.

Nowadays most of us invest in equities through unit or investment trusts. These come as pre-packaged, retail financial products. But there are plenty of alternatives for ethically minded investors.

According to Fleur Leach, ethical stockbroker at Capel-Cure Sharpe: "Many of my clients are looking for a bespoke service, matching their specific ethical or environmental concerns to the purchase of shares in particular companies. We offer a full, discretionary management service for unit trust portfolios, but investing into shares allows our clients to study company activities in depth and decide just which areas they wish to support or avoid."

Most of Ms Leach's clients avoid investing into areas such as arms manufacture, animal testing and the manufacture of tobacco products. But what about the production of alcohol? "Negative screening can be too restrictive, and I wonder how many of us really object to the responsible production and sale of alcoholic products," she says. "For instance, after discussion, a client might decide that while avoiding the principal manufacturers in this sector, they were prepared to invest into restaurant or hotel chains which never-theless distribute alcohol products."

With many of the ethical sector's unit trusts overweight in small to mid cap shares, buying a share portfolio also offers other attractions. "Issues around asset allocation may be eased by buying shares rather than collectives," observes Ms Leach. "An individually tailored share portfolio may hold a far higher proportion of large cap, FTSE 100 shares than you will find in most of the sector's collective funds. This can be achieved even with the use of a wide set of negative screens. On the other hand, a share portfolio can also be themed around an area of special interest like the environment."

Among small cap shares meeting favour with Ms Leach is First Technology, with a current share price of around 480p, and capitalisation of pounds 267m. The company has two main areas of interest: the development of crash-activated fuel cut-off systems for cars, and some 80 per cent of the market in crash test dummies. From the FTSE 250, Ms Leach selects shares in Halma, trading around 117p, giving the firm a capitalisation of some pounds 423m. "The whole business is focused on safety products," observes Ms Leach. "These include detection and protection products such as fire and gas detectors. This a niche with strong growth potential."

Finally, among FTSE 100 or large cap shares, Ms Leach likes retailer Tesco, with a current share price of around 184p, and capitalisation of over pounds 12.2bn. "They give a lot of encouragement to organic products and are against animal testing. Also they give good information to consumers on nutritional issues and take a clear stand on questions like GM foods."

Meanwhile, at the other end of the investment spectrum, Malcolm Lynch, a solicitor, serves as a matchmaker for private investors and business start-ups with an ethical or ecological theme. "Projects range from those with high social but poor financial returns to those which can compete in the open market against non-ethical investments. Most are either private or unlisted companies or else various types of deposit taker, ranging from ethical banks to different forms of mutual society," he explains.

Examples include the Ethical Property Company, which has already raised pounds 500,000 from a share issue this year. Managing director Jamie Hartzell explains: "We are offering the opportunity to invest into a firm which specialises in letting office space to charities and voluntary organisations." They are renovating a building in Oxford which will serve as an environmental resource centre. They are also planning to develop a site in Bristol which will become the headquarters for Women's Aid, a charity for battered women. "The voluntary sector is huge, says Mr Hatzell, "and demand for the kind of office space we provide cannot currently be met on the open market."

Elsewhere , the Wind Fund, sponsored by Triodos Bank has issued shares and raised pounds 2m for investment into the generation of electricity using wind turbines and hydro-electric power. Shares are on offer, but are not traded on the stock exchange. Triodos Bank say they will try to match anyone wishing to sell their shares with prospective buyers but warn that there is no guarantee of this happening.

Mutual societies have been formed around regional redevelopment programmes. Aston Reinvestment Trust (ART), has raised over pounds 1.4m against a target of pounds 3.5m by 2000. ART is registered as an "industrial provident society", with a board of governors chaired by Sir Adrian Cadbury. You can invest between pounds 250 and pounds 20,000 and from 2000, the society will declare a dividend payable on these accounts. Money raised is re-lent into the Aston area, providing seed-corn capital for small business start-ups.

The Industrial Common Ownership Fund (ICOF) will invest anywhere in the UK. ICOF issues ordinary shares paying a 6 per cent dividend; this money is re-lent to small businesses run as workers' co-operatives. ICOF only invest into businesses they think will succeed, such as the Altham Hardwood Centre, which supplies sustainably farmed hardwoods for the restoration of old buildings.

'The Independent' has published a free 20-page Guide To Ethical Investment, spon-sored by the David Aaron Partnership. Write to: The David Aaron Partnership, Shelton House, High Street, Woburn Sands, Milton Keynes, MK17 8SD or call 01908-281544

Independent Partners; request a free guide on NISAs from Hargreaves Lansdown

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