It doesn't pay to be uncaring


You don't normally find performance art at investment conferences. In recent years, however, there has been a regular star turn. If you were lucky enough you could catch some ruthless Wall Street banker, red in tooth and claw, stand up and champion the cause of ethical investment. He'd touchingly proclaim his new-found devotion to "social responsibility" or "green" issues. Nothing, of course, to do with the fund he might be about to launch.

It's been like watching a crocodile propose vegetarianism.

Suddenly, this show is over. The crocodile's tears were possible because, to him, ethical investment was largely irrelevant. In the great casino that is the market, it was a side game played out on one of the small tables.

But political forces are now moving the game to the centre tables. In the summer, the Government introduced a new requirement for pension funds. In future, every scheme will be required to "make a statement on social, ethical and environmental investment". UK pension funds are worth the best part of pounds 1,000bn - the biggest component of the UK stock market. Suddenly, the stakes in the ethical game have become frighteningly high.

Pension funds have seized on the idea with enthusiasm. Not least the vast funds controlled by local authorities. This autumn's local government conference was dominated by the new buzzword SRI (socially responsible investment). One after the other, politicians took the stand to argue in its favour. Unfortunately, the investment managers in the audience treated this with a mixture of bewilderment and downright hostility.

Why should investors be frightened? Of course it would be wrong if the individual beliefs or prejudices of pension trustees led to underperformance. If ethical investment meant lower returns, and therefore lower pensions, then scheme members would have every right to be up in arms. But I do not believe this has to be the case.

Shareholder power is a crucial part of how any capitalist society works. It is the ultimate check on the behaviour of companies. Pension funds are the most powerful part of this equation. It is right for the Government to get involved. There are few corners left in our society where private companies do not reach. In the States, the extremely litigious nature of society frightens companies into respecting the issue. The very large awards in the courts will be watched by corporate power brokers as matters of commercial interest. The UK is different. We have no such legal club with which to batter misbehaviour.

We used to hear a lot about the stakeholder society before the concept was kidnapped as a soundbite for the new pensions vehicle. In its original use it referred to the German concept. In Germany, a business has a 360- degree vision. It is not simply owned by the shareholders but equally by its workforce and customers. It considers the impact on the community in which it operates. Many investors shy away from this kind of socially responsible investment, believing it to be costly dreaming. I passionately believe this to be false.

Is it really so radical to suggest that a company which looks after its workforce and which thinks about its customers will perform better?

It makes financial sense to talk about equal opportunities. We are living in a multi-cultural, multi-ethnic society, and if there's anyone in a senior position who doesn't realise this then it's their loss. It is also their business's loss. The courts will gradually clear up discrimination problems in the workplace, while the market will reward companies that understand their customers.

Trashing the environment for a quick profit might give a company short- term gains but it also creates very serious long-term liabilities. The cost of the environmental clean-up in the United States is now running into billions, and there are an awful lot of shareholders picking up the bill. Being green makes you financially clean.

In this area a "Third Way" can have real meaning. We have a great opportunity in the UK to combine all that is good about the thrusting dynamics of American capitalism with the more caring social model we see in continental Europe. It is time to rewrite the Eighties creed that "greed is good for you". Ethical investing will make you rich.

n Chris Walker is director of Hill Samuel. Contact: christopher.

Start your day with The Independent, sign up for daily news emails
ebooksA celebration of British elections
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Ashdown Group: Editor-in-chief - Financial Services - City, London

£60000 - £70000 per annum + benefits : Ashdown Group: A highly successful, glo...

Ashdown Group: Junior Application Support Analyst - Fluent German Speaker

£25000 - £30000 per annum + benefits: Ashdown Group: A global leader operating...

Guru Careers: Management Accountant

£27 - 35k + Bonus + Benefits: Guru Careers: A Management Accountant is needed ...

Guru Careers: Project Manager / Business Analyst

£40-50k + Benefits.: Guru Careers: A Project Manager / Business Analyst is nee...

Day In a Page

General Election 2015: ‘We will not sit down with Nicola Sturgeon’, says Ed Balls

'We will not sit down with Nicola Sturgeon'

In an exclusive interview, Ed Balls says he won't negotiate his first Budget with SNP MPs - even if Labour need their votes to secure its passage
VE Day 70th anniversary: How ordinary Britons celebrated the end of war in Europe

How ordinary Britons celebrated VE Day

Our perception of VE Day usually involves crowds of giddy Britons casting off the shackles of war with gay abandon. The truth was more nuanced
They came in with William Caxton's printing press, but typefaces still matter in the digital age

Typefaces still matter in the digital age

A new typeface once took years to create, now thousands are available at the click of a drop-down menu. So why do most of us still rely on the old classics, asks Meg Carter?
Discovery of 'missing link' between the two main life-forms on Earth could explain evolution of animals, say scientists

'Missing link' between Earth's two life-forms found

New microbial species tells us something about our dark past, say scientists
The Pan Am Experience is a 'flight' back to the 1970s that never takes off - at least, not literally

Pan Am Experience: A 'flight' back to the 70s

Tim Walker checks in and checks out a four-hour journey with a difference
Humans aren't alone in indulging in politics - it's everywhere in the animal world

Humans aren't alone in indulging in politics

Voting, mutual back-scratching, coups and charismatic leaders - it's everywhere in the animal world
Crisp sales are in decline - but this tasty trivia might tempt back the turncoats

Crisp sales are in decline

As a nation we're filling up on popcorn and pitta chips and forsaking their potato-based predecessors
Ronald McDonald the muse? Why Banksy, Ron English and Keith Coventry are lovin' Maccy D's

Ronald McDonald the muse

A new wave of artists is taking inspiration from the fast food chain
13 best picnic blankets

13 best picnic blankets

Dine al fresco without the grass stains and damp bottoms with something from our pick of picnic rugs
Barcelona 3 Bayern Munich 0 player ratings: Lionel Messi scores twice - but does he score highest in our ratings?

Barcelona vs Bayern Munich player ratings

Lionel Messi scores twice - but does he score highest in our ratings?
Martin Guptill: Explosive New Zealand batsman who sets the range for Kiwis' big guns

Explosive batsman who sets the range for Kiwis' big guns

Martin Guptill has smashed early runs for Derbyshire and tells Richard Edwards to expect more from the 'freakish' Brendon McCullum and his buoyant team during their tour of England
General Election 2015: Ed Miliband's unlikely journey from hapless geek to heart-throb

Miliband's unlikely journey from hapless geek to heart-throb

He was meant to be Labour's biggest handicap - but has become almost an asset
General Election 2015: A guide to the smaller parties, from the the National Health Action Party to the Church of the Militant Elvis Party

On the margins

From Militant Elvis to Women's Equality: a guide to the underdogs standing in the election
Amr Darrag: Ex-Muslim Brotherhood minister in exile still believes Egypt's military regime can be replaced with 'moderate' Islamic rule

'This is the battle of young Egypt for the future of our country'

Ex-Muslim Brotherhood minister Amr Darrag still believes the opposition can rid Egypt of its military regime and replace it with 'moderate' Islamic rule, he tells Robert Fisk
Why patients must rely less on doctors: Improving our own health is the 'blockbuster drug of the century'

Why patients must rely less on doctors

Improving our own health is the 'blockbuster drug of the century'