Normally I work hard to avoid gender-specific terms in articles, especially in titles. But middlemen has a clear meaning—and we know what these middlemen do, don’t we? Especially in financial services, particularly in the UK, they play a key role in distributing investment products to final investors, who might be either retail, institutional or High Net Worth. Without converting them to ethical investment we will get nowhere.
Today a tragic circumstance exists. Investors say they want responsible investment products, but they are way ahead of their advisors whose knowledge of this area is limited. These middlemen, which include the IFAs, private banks, and other wealth managers, are lagging partly due to ignorance but also due to time. The array of ethical products is still limited, confidence in them builds slowly and financial firms are loathe to stick their necks out. It’s a shame this prudence has come so late—but that is a story for another day!
What is needed is a three pronged conversion assault. First, we as a sector need to speak out on this issue and raise awareness. If we make the argument in a positive way it will be most effective. For example, when we talk about the growing desire of investors to invest ethically, we make the argument that firms which fail to offer such products will be missing out on a money-making opportunity. I confidently predict that social investment (or whatever you wish to call it) will grow far faster than other investment worldwide. Not everyone might agree with this but occupying this stronger ground, is preferable than lecturing people on what they “should” be doing.
The second prong involves government. Existing mechanisms implicitly favour mainstream investment. They simply choose to ignore the fact that many investors want BOTH a social and financial return, in favour of the arrogant presumption that returns maximisation is everything. Many surveys prove this not to be the case. We need to the government to require financial firms to run “ethical checks” on their clients in the same way they oblige firms to assess risk tolerance. Ethical and social risk matter a great deal to investors—why are investors permitted to neglect these needs.
Finally, investors need to hassle their professional advisers. If we ask, the products will come. Coutts Bank is a case in point. It was not too sure of its policy on social investment until its client base, especially those who have made their own money, demanded these products. Now it is seeking to leap to the forefront.
With this three-pronged approach, and the growth of ethical players such as Investing for Good, ClearlySo (I am its CEO), Marmanie Consulting and a host of IFAs who are members of the Ethical Investment Association, I am certain we can achieve mass conversion.
First Published in Third Sector in September 2009.