The social investment sector must be open to broader investors if it is to bloom. If you decide you want to invest your money in social enterprise, how are you going about it? The truth is you would find it difficult. Even though there are many really exciting investments available to the general public, it is virtually impossible to find out what there is to buy and how to go about buying it. The result? Social investment is only open to the truly committed – the hard core.
Jamie Hartzell
The sector is fond of talking about the billions that could be invested in the social investment market, but so far it has done little to make that happen. Even the newly launched Social Stock Exchange doesn't allow you to actually invest in any of the businesses featured, and, furthermore, it is restricted to businesses already listed on a mainstream stock exchange, which excludes almost every social enterprise in existence.
In reality, the social investment marketplace barely exists. It is more akin to a few pop-up restaurants advertised by flyers on lamp-posts than a high street full of established eateries that are regularly reviewed online and in the local press.
Most people who set out to invest ethically will end up investing in ethical unit trusts. This is simply because the marketplace for these funds is better established. There are deal platforms that allow you to invest online, comparison websites that allow you to choose the funds that best suit your needs and independent financial advisers who will recommend which funds to invest in.
Few people realise that most of these funds are not positive investments at all, but merely negative screens. They simply avoid companies active in the most offensive sectors such as arms, tobacco and pornography, and otherwise invest in whatever produces the best return. According to a recent survey by Share Action, "ethical providers often appear to assume that their job begins and ends with screening out 'unethical' companies".
Negative screening can lead to some shocking results. In 2012, a survey by Vigeo of the 10 most popular companies for Europe's ethical funds to invest in shows number three to be Total SA and number five to be BG group. These are two of the world's biggest gas and oil producers – BG Group alone produces the oil equivalent of a quarter of a million tonnes of carbon dioxide a day. In a world where climate change is now a reality, it is hard to see this as a positive investment.
At number eight was Nestlé SA, still said to be causing malnutrition by promoting powdered baby milk to poor mothers in the developing world, despite many years of campaigning to stop them.
Most people I tell this to are quite taken aback when they realise their efforts to ethicalise their investment portfolio have led them to invest in a basket of gas, telecoms, drugs and finance businesses. This negative screening is not what they imagine ethical investing to be. They want to invest positively in businesses because of what they do, not what they don't do. And that means investments that offer not only a good financial return but are clearly and unambiguously helping society as well.
As someone who invests positively in businesses with a clear social purpose, I wanted to be able to browse and compare the full range of positive investments available. I spotted an opportunity to use the internet to create a one-stop shop that brings together the most positive investments and makes the process of investing in them easy to understand and do.
Earlier this year, I launched Ethex, which is bringing together the full range of positive investments in fair trade, renewable energy, tackling poverty, organic farming, community shops and pubs, sustainable forestry, green transport, organic food and farming, and social property. These businesses already constitute a genuine marketplace. In total, there is more than £1bn invested in businesses trading in or financing these areas.
If we can bring the same level of individual engagement to ethical investment as we have to ethical consumerism, then we will start to see the beginnings of a true social investment marketplace, and the social investment sector will bloom.
Jamie Hartzell is the managing director at Ethex, a social investment marketplace. (
http://www.theguardian.com/social-enterprise-network/2013/aug/08/social-investment-not-always-ethical)
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