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The number of responsibly-invested adviser-managed portfolios continues to grow. They have been spurred on in recent years by surveys which have found that many of these portfolios outperform the general market and in many cases are ahead of the curve, looking favourably on companies that invest in green technology (for example) many years before it became fashionable.

I have two concerns with the way people use responsible investment. The first is philosophical the second is practical.

From a moral point of view, is it really possible to sign away one’s ethical concerns into a one-size-fits-all investment option? Or do we just have blind faith that our fund managers will have similar ideas to us about what constitutes unethical corporate practices? (or even better ideas – now there’s a thought!) I just suspect that few probing questions are asked by people who tick that box, and must admit I was the same when I signed on for my retirement fund.

The second question is, do those investment funds make any kind of meaningful impact on the way corporations are governed? That is the goal surely?

Paul Hawken of Highwater Global Fund believes the answer is a resounding ‘no!’ The problem he sees is a lack of transparency from the mutual funds, who do not disclose their ratings criteria. He wishes there were more consumer bodies like America’s Consumer Reports or Australia’s Choice who could make detailed evaluations of what exactly the different responsible investment options are offering.

The good news is, one organisation is now seeking to do just this: Global Impact Investment Rating System (GIIRS) will be launching in July. As one director told Institutional Investor Magazine last week:

There’s no use in just letting companies tell their own stories, because they can always just tell the piece of the story they want, and not disclose the rest.

GIIRS is an initiative of B Labs, the same people behind B Corps which rates companies’ impact for consumers’ benefit. GIIRS evaluates companies from an investor’s point of view.

Good on them, I hope it casts some light on the murky business of evaluating what is and isn’t an ethical business practice.

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Comments
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