Ethex – growing the market for high social impact investments

During National Ethical Investment Week (October) 2012 I attended a very lively debate, held in a Café close to St Pancras, North London. The room was filled with a very enthusiastic audience drawn from a range of NGOs, campaign groups and some private investors. The theme of the talk was, in summary, “Is ethical investing really all that ethical” or to put this another way, are collective investments badged as ethical really doing all that much to change the way the economic system works and avoid continued environmental degradation?

There were a great many in the room who argued forcefully for this motion and expressed a great deal of frustration at the extent to which the original principles of responsible and ethical investing had become watered down, diluted by the shift towards Socially Responsible Investing (SRI). What angered many was the fact that many of the ethical and SRI funds hold considerable weightings towards the oil and gas sector in particular.

The growth of impact or social investment

Impact investing differs from conventional Socially Responsible

Investment (SRI) because the businesses attracting this type of investment have social or environmental benefit as their core purpose. Often the enterprises concerned are structured as Charities, Social Enterprises or Industrial and Provident Societies. This sets them a long way apart from collective investment Unit Trusts to Open Ended Investment Companies (OEICs) buying the shares of for profit businesses listed on global markets.

In order to facilitate growth in this sector by establishing a market place for these investment there are plans to launch a number of investment “platforms”, the first to launch being Ethex (www.ethex.org.uk).

One of the key individuals behind Ethex is Jamie Hartzell formerly of the Ethical Property Company, a successful social impact investment.

It’s been a long process bringing the platform to market because of the complex legal questions the founder have faced but at the start of this year the platform went live and they are investment ready.

The number of investment options offered via the platform is currently quite limited but Jamie tells me they have a pipeline of new investment schemes due to launch.

I personally believe there is considerable demand for investments of this type and that creating an active market place for the product is a considerable step forward.

John Ditchfield on behalf of the Ethical Investment Association