The launch of a new Trust
A Family Assurance Friendly Society case study

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Page 4: Ethical investment

Ethics are the moral values and principles which influence how individuals, groups and society behave. Business ethics are therefore the values and principles which operate in the world of business. In business, it is possible to carry out many practices which are not strictly ethical, yet are lawful. However, many successful companies are based on strict ethical principles and most people would argue that business should keep within some form of moral framework.The United Charities’ Ethical Trust aims to achieve long-term growth of capital whilst avoiding investments in companies that generate significant turnover from:

  • alcohol or tobacco
  • export of goods or services for military uses
  • supplying ozone depleting chemicals
  • testing of cosmetics or toiletries on animals
  • using intensive farming methods
  • extracting or importing tropical hardwood
  • trading in prohibited pesticides
  • activities which significantly pollute waterways;
  • or who have registered companies in a significant number of countries identified as violating certain human rights.

For the purposes of the United Charities’ Ethical Trust, Family Assurance subscribes to the Ethical Investment Research Services (EIRIS) - an independent organisation which researches companies to see if they pass the required criteria. In addition, the existing portfolio is frequently reviewed, along with current ethical and environmental issues. The United Charities’ Ethical Trust invests predominantly within the UK and believes that small and medium sized enterprises (SMEs) that meet the ethical criteria will provide excellent potential for growth over the longer term.

‘With fund selection, it is important to focus on the future and take a balanced view of how ethical investments will compare. Our belief is that the well-run ethical funds will continue to prosper.’ (Source: The Ethos guide to Ethical and Green PEPs.)

Benefiting charities

Family Assurance Friendly Society 3 Image 3As well as satisfying ethical criteria, some of the profits made from managing the United Charities’ Ethical Trust are donated to charity. Family Assurance Friendly Society was the first organisation to convert an existing non-ethical unit trust into an ethical one. Certain difficulties had to be overcome in order to do this. For example, it took several attempts to get the balance right between allowing the fund manager enough companies to choose from, whilst taking as many different ethical considerations into account as possible. An ethical investment fund will never satisfy everyone - the majority of people would oppose the inclusion of companies which test cosmetic products on animals but the distinction is more blurred regarding animal experiments which could advance medical research.

An overwhelming support for change, particularly amongst the younger generation - the investors of the future - was immediately apparent to Family Assurance. According to a recent opinion poll, 40% of people said they would like to invest in ethical banking and pension plans and 35% said they make ethical choices when they shop. (Source: Frost and Sullivan.)

When Family Assurance approached existing unit holders in the United Charities’ Ethical Trust, the Society found that 98% of those who expressed an opinion, voted in favour of incorporating new ethical criteria. (Source: Ethical Investments -A Saver’s Guide.) The Trust therefore sold some of its existing portfolio of shares and bought new ones. This process was completed in June 1996.

Family Assurance Friendly Society | The launch of a new Trust