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Investing in principles

Teachers are helping to turn ethical investment into a boom market, reports Elaine Williams

When it comes to investing ethically, teachers are apparently ready and willing. Indeed, teaching is said to have more ethical investors than any other profession.

In response to this, a firm of independent financial advisers has struck a deal with a "major" insurance company to offer an ethical additional voluntary contribution (AVC) scheme for teachers wishing to top up their pensions. The scheme, which will compete with the AVC offered by the Prudential through the Teachers' Superannuation Scheme, is to be launched soon.

"We've had a huge amount of interest in ethical funds from teachers, so we wanted to present the option for them to invest ethically at competitive rates through their pension," says Greg McCrave, national development manager of Ethical Financial.

"Many teachers come to us wishing to review their finances from an ethical perspective. Teachers still largely have a vocational interest in their job; they are not doing it for financial rewards, and because of this mindset, when they do have money to invest they are more likely to be interested in where that money is going as well as the cash result."

However, ethical investment does not necessarily mean sacrificing financial return for moral principles. It is not merely an attraction to the young and passionate who are willing to place concerns about animal welfare, the environment or human rights above their financial interests. In fact it is among the UK's fastest-growing sectors and is more than likely to attract middle-aged managers and professionals who regard it as a shrewd, as well as principled, move.

Avoiding investing in companies with interests in oppressive regimes, armaments, tobacco, vivisection, gambling, alcohol and pornography, or backing only those companies that work to preserve the environment, is turning out to be a prudent move.

In 1984 there was only one ethical fund, the Friends Provident Stewardship Fund, and a limited product range. Now there are 44 funds managed by 29 groups, so the choice is wide and it is possible to tailor investment to fit your own ethical priorities.

According to the Ethical Investment Research Service (Eiris), by June 1996 the value of ethical investment in Britain was Pounds 1.1 billion, more than double the 1993 figure. But by January 1997 the value had soared to Pounds 1.3 bn. With the exception of 199293, ethical funds have outgrown unit trusts every year since 1989, achieving three times the growth rate of unit trusts.

This is partly because ethical portfolios tend to hold a higher percentage of smaller companies, which are more volatile, but which offer better returns than blue-chip companies.

However, investing ethically is not straightforward. Eiris offers to carry out portfolio "screens" for anyone who wants to know whether, for example, they are unwittingly investing in arms-exporting companies. The Campaign Against the Arms Trade's recent survey caused consternation when it revealed that the Church Commissioners and the Red Cross, among other charities, were investing in UK arms manufacturers such as GEC, GKN and Vickers.

In similar vein, Credit Suisse removed W H Smith shares from its ethical Fellowship Trust after Ethical Financial pointed out that the newsagent was the country's largest distributor of pornographic magazines. As ethical investment grows, so will its influence on company and investment practice. Although it currently accounts for just over 1 per cent of the UK stock market, it will, according to Greg McCrave, follow trends in the US, where 25 per cent of mutual funds are screened for ethical acceptability.

Eiris offers a 13-step questionnaire enabling prospective investors to indicate where they draw the line.

Holden Meehan, independent financial advisers, has produced a guide to investment funds that includes a table of the main ethical funds, awarding points for how green or ethical they really are, taking into account whether they have set up independent committees and employ outside specialist research.

Eiris, the Ethical Investment Research Service, can be contacted at Freepost, London SW8 1BR. Tel 0171 735 1351 Holden Meehan's "An independent guide to ethical and green investment funds" can be obtained from Bristol Office, 11th Floor, Clifton Heights, Triangle West, Clifton, Bristol BS8 1EJ Tel 0117 925 2874


Frank Thompson, a 30-year-old business studies teacher at the Catholic Loreto Sixth Form College in Hulme, Manchester, believes he is putting his money where his mouth is by topping up his pension through an ethical fund.

He says: "As a teacher you are called upon to take assemblies and to talk about values, and if you believe in the things you say then you have to carry them out in your own personal life. I had taken quite a bit of time to think what to do with my savings. I don't want to invest in arms, and as I am pro-Life I would not want to invest in pharmaceutical companies using aborted tissue."

As he started teaching relatively late, he decided on a top-up pension. However, he expects to do well from his investment in a Friends Provident Stewardship Fund. Although the charges were high, he feels these are outweighed by the fund's good performance. "I don't think one pays a substantial personal penalty in choosing to invest ethically," he says. "I may find at the end of my teaching career that I have done better than if I had invested in a non-ethical AVC. By investing ethically, I feel I am exercising choice."

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