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A new report says that ethical finance is a growth market, with investment opportunities such as community wind farms. © Picturenation.co.uk
Ethical finance needs to appeal to a wider audience, according to a new report by the New Economics Foundation (nef). Going Green? How financial services are failing ethical consumers calls on high street banks to develop new products and expand existing ethical finance initiatives.
It also says there needs to be stronger marketing information to attract high-net-worth (HNW) individuals into the socially responsible and ethical financial markets.
Ethical finance is a growth market. Socially responsible investment (SRI), ethical banking and credit union deposits are now worth £11.6bn, according to the 2006 Ethical Consumerism Report.
However, access to ethical financial products and services is not meeting demand. “If the financial services industry is to move with the times, much remains to be done to increase the range of ethical products available to consumers, and to improve the ethical performance of our financial institutions,” says the nef report.
It particularly emphasises the need to deepen the range of initiatives aimed at HNW individuals who want to be socially responsible investors. It also suggests more marketing and use of the media to raise awareness among wealthy individuals and a central website with up-to-date information on the ethical finance sector.
The author, Jessica Brown, Head of Access to Finance at nef, argues, “Ethical investors are likely to be affluent individuals with a higher-than-average education and a greater willingness to purchase financial products with added ethical features; in some cases even if they have to pay more. These are attractive clients for financial institutions to have.”
A small group of ethical banks have seized this opportunity and developed social and environmental savings accounts, bonds and share offerings in areas such as community wind farms, social enterprise and ethical companies.
However, Brown points out that while “SRI has demonstrated substantial growth and proven its potential for financial performance. . . these gains are still fragile, and require a stronger commitment from financial services institutions.”
Recommendations in the report include:
- There should be provision of simple, low-risk products from established high street names
- Banks should develop robust ethical policies across all their operations and be more transparent about their transactions
- SRI fund advertisements should appear in more mainstream press and place more emphasis on social and environmental factors
- There should be more partnerships between high street retailers and SRI retail products, for example, the new M&S ethical fund
- Government initiatives to build long-term savings should also incorporate ethical finance as an option
- Pension fund trustees should use their voting power to encourage greater environmental, social and ethical accountability from companies.
The report is freely downloadable from nef’s website.
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