Darren has been building bespoke ethical investment portfolios for his clients for the past 13 years or so. Upon joining Thomas and Thomas as a trainee financial planner, I was immediately fascinated by this area of investment.
Since the launch of our unique ‘Pro-Ethical’ offering in January last year – we have seen a marked increase in the number of ‘Proactive’ clients who have moved away from a traditional mainstream portfolio to an ethical one. Around nine million pounds of our clients’ assets are now invested in ethical funds.
Clients are now looking for much more than just positive returns from their investments. They are seeking a broader impact within society, in the belief that they are responsible and have a duty to drive positive change. Their goal is not just to grow their wealth but also to combat unethical business behavior that damages our society or environment.
This seems simple, but the construction and monitoring of an ethical portfolio can be very difficult. In our experience, most financial advisers avoid this area of investment because of this.
We understand that ‘ethical’ is broadly defined as ‘values by which judgments of right and wrong behavior are made’. In other words, it is the principles of morality.
However, what constitutes ‘ethical’ to one person may not be particularly ‘ethical’ to another.
Our current Pro-Ethical portfolios were originally designed around the clients that we were working with during the launch over a year ago. We built these portfolios around their personal views. We were very aware that this could put us in danger of falling into the trap of ‘telling’ our new Pro-Ethical clients what ethical looks like.
We wanted to offer every one of our Pro-Ethical clients a voice and a chance to register their opinions in this matter. We felt that an online survey was the best way to do this, without influence, whilst also supporting the environment.
Throughout December 2017, Darren and I designed a short ‘60 second survey’ for our Pro-Ethical clients. We wanted to find out what ‘ethical’ looked like to them through a series of quick fire scores across 17 different ethical areas of concern. Our plan was to be able to gain a view from our clients – which we can then feed into our model Pro-Ethical portfolios and reassess on an annual basis.
The response rate was amazing, with over 80% of our clients completing the survey within a fortnight of it being sent. Using technology, we were able to then collate the responses to see what collectively matters most to our clients.
The most important area that investors wanted to avoid was the exploitation of workers through Poor Human Rights. In second place was Animal Testing for Cosmetics and third was Pornography. The least important areas to screen out at this time were Alcohol and Nuclear power. Clients most wanted to support (screen in) investments that consider Climate change and the Environment.
We offered a box for clients to record their comments. These were very useful as they told us that there is a desire to invest in clean water and to try and support companies that are seeking to eradicate plastics from their production amongst other things.
We believe that this has been an invaluable exercise. We have been able to confirm what is important to our clients and what they are collectively most concerned about. This will help when we have to filter funds again in future quarterly Pro-Ethical reviews.
The survey has underlined the importance of environmental investment to our clients. We do have a bespoke ‘ECO’ portfolio that really fits this bill. However, we have not launched it on our quarterly review service (yet!)
Thank you to all of our Pro-Ethical clients who took part in the survey, we greatly value your views and thoughts. If there is anything you would like to discuss further, we are only a phone call away.