Memorandum by the UK Social Investment
1. The UK Social Investment Forum's primary
purpose is to promote and encourage the development and positive
impact of socially responsible investment throughout the UK. Our
membership of stakeholders in ethical, green and socially directed
investment includes 25 major financial institutions. UKSIF also
provides the secretariat for the All-Party Parliamentary Group
on Socially Responsible Investment, chaired by Tony Colman MP.
2. We welcome the opportunity to give evidence
to the Joint Committee on Financial Services and Markets. UKSIF
has also submitted evidence to the Treasury Select Committee inquiry
last November and responded to the Treasury's consultation document.
3. We were however disappointed to see no mention
of our concerns in the Treasury's March progress report. These
concerns focus on three key areas: the lack of any mention of
the regulator's role in contributing to sustainable development;
the need to ensure consumers are educated about the social and
environmental impact of their investments; and the need to protect
the green and ethical consumer.
4. There is a growing awareness among some financial
services players that our economic future relies on our environmental
future, and that the financial sector has a key role to play.
The FSA as the new single regulator of the industry should in
our view be involved in a debate on what is best practice in sustainable
development, i.e., environmental protection, social equity and
economic development, and ensure that their activities promote
rather than inhibit sustainability.
5. UKSIF believes the draft Bill should be amended
to integrate a regard to sustainable development as an essential
element of maintaining market confidence through the elimination
of risk in financial services and the draft Bill should make this
6. An increasing number of consumers have ethical
and social concerns. Green and ethical consumers form a major
group within the population. In 1996, MORI identified 41 per cent
of the adult British population as green consumers. We believe
that FSA's new remit for consumer education should take on board
these legitimate concerns and educate people about the choices
they can make about where their money goes. The existing clause
4 of the draft Bill should be amended to include a subclause to
promote awareness of the range and general nature of impacts and
finance on individuals, society, and the environment.
7. The increase in ethical consumers is also
evidenced by the growth in funds invested ethically which has
outstripped all unit and investment trusts in every year except
one since 1989. In the past two years to January 1999, the total
funds managed by ethical unit and investment trusts has almost
doubled from £1.1 billion to £2.1 billion according
to the Ethical Investment Research Service (EIRIS).
8. The Financial Services and Markets Bill should
make explicit the protection of green and ethical consumers. We
believe that the protection of consumers objective as drafted
in Clause 5 is insufficient to address this aim and should be
amended to include the differing degrees to which consumers wish
their ethical, social and environmental concerns to be taken into
account in relation to different kinds of regulated activities.
Ethical, social and environmental concerns include consideration
of the range and nature of impacts of investment and finance on
individuals, society, and the environment.
9. We also hope the FSA will protect the consumer
by issuing guidance stating that regulated persons should ask
consumers whether they have any ethical, social and environmental
concerns which they wish to have taken into account in the financial
advice which they receive as part of the routine fact find.