Wise Ethical Investment Seeks Profit
Monday, December 12, 2011
Like motherhood and apple pie, socially responsible investment warms most people’s hearts. But during a two-year cycle trip across Africa, Swiss investment banker Klaus Tischhauser realized the SRI industry was failing in a key challenge-fighting poverty. Ten years on, the grassroots style of social investing he helped pioneer is wooing many wealthy investors
The rich are different, and not just because they have more money. Wealthy individuals often have a wider sense of responsibility toward society. Traditionally, this desire to do good is harnessed through philanthropy.
But a growing number are now turning to socially responsible investing, which marries social good with financial returns.
“These investors realize that there is no contradiction between ethical and financial performance,” says Mr. Tischhauser, co-founder and chief executive of responsAbility Social Investments, an asset manager for social investment.
Despite the market turmoil, the wealthy have kept putting money into socially responsible investment. That is mainly because they can afford to take a long-term perspective, particularly if they have inherited wealth.In 2010, Europe’s high-net-worth individuals-usually defined as people with at least $1 million in financial assets (excluding residences and consumer durables)-dedicated €729 billion, or around 11% of their wealth, to “sustainable” investing, according to Eurosif, a Paris-based research firm. That’s an increase of 35% over the figure for 2008, even while such individuals’ total assets under management shrank during that two-year period because of the global economic crisis.
“They aim to protect assets rather than chase returns, so short-term turbulence has less of an effect,” says Anders Nordheim, Eurosif’s head of research.
The trend, Mr. Nordheim says, is here to stay. By 2013, Eurosif predicts the share of HNWI assets allocated to sustainable investing will have risen to 15% or just below €1.2 trillion.
“There has definitely been a pick-up of interest in the SRI area,” says Karina Litvack, head of governance and sustainable investment at F&C Investments, a U.K. fund manager whose SRI roots go back to the 19th century.
Clearly, one of the attractions of SRI for wealthy investors is the comfort in knowing their money is helping make the world a better place. “Part of our job is to tell our investors heart-warming stories so that they feel good,” says Mr. Tischhauser. His firm has grown to manage $1 billion in assets and offers eight SRI products, covering themes such as microfinance, fair trade and small and medium-sized enterprise financing.