History of ethical investing

Dating back to the nineteenth century, the roots of ethical investment can be found among religious movements including the Quakers and Methodists, whose concerns included issues such as temperance and fair employment conditions.

A hundred years ago

At the beginning of the 1900s, the Methodist Church in North America decided to invest in the stock market, having previously viewed it as a form of gambling. However, they wished to exclude certain types of companies, specifically those involved in alcohol or gambling. The Quakers soon followed, and were especially keen to avoid weapons manufacture.

Public demand for ethical investment vehicles took off in America with the launch of the Pax Fund in 1971 as a reaction against the Vietnam war. Discontent caused by the Vietnam War had led some investors to question how their money was being used. Many were particularly angry with the manufacturers of Agent Orange, the defoliant sprayed on Vietnamese jungles, which caused deformations in the babies of people who came into contact with it.

In the UK

The history of ethical investment in the UK goes back to the late 1960s and early 1970s when a number of groups were exploring the possibilities for this type of investment fund. One of the individuals involved was Charles Jacob, then an investment manager with the Methodist Church. He prepared a proposal for the first ethical unit trust in 1973. At that time it failed to obtain approval from the Department of Trade, but a few years later permission in principle was granted.

The apartheid regime in South Africa accelerated the promotion of ethical investment in the 1980s. In 1983 EIRIS was established as the UK’s first independent research service for ethical investors. Also in 1983, Friends’ Provident (which had been founded in 1832 to provide life assurance for members of the Society of Friends, more commonly known as Quakers) offered to manage an ethical fund with the investment criteria determined by a separate committee. This led to the launch of the Stewardship Unit Trust, Stewardship Life Fund and Stewardship Individual Pension Fund in June 1984. Charles Jacob was appointed as a founder member of the Stewardship Committee of Reference.

During the twentieth century more churches, charities and individuals began to take account of ethical criteria when making investment decisions.

A major boost to the field came in 2000 when it became UK law for occupational pension schemes to say whether they took account of any social, environmental or ethical factors when deciding where to invest.