Asset managers should take “the moral high ground” to be rewarded by investors, according to a new report from the Long Finance project, established by Z/Yen Group and Gresham College, called Survival of the Fittest: A Swift Survey of Shifts in Asset Management.
Moral issues pertaining to asset management include CSR issues, as well as legal, ethical and discretionary responsibilities. While the moral high ground is an “abstract concept,” the report says, it is evident when asset managers demonstrate certain qualities. For example, they should be able to demonstrate how they measure, define and verify outcomes. Also, measurements such as assets under management, fund performance and asset allocation should be published in a way that stakeholders can understand them.
In other recommendations, the report says the capabilities of people and organisations should be measured by outcomes over the long term, with a view to consistency. This would allow investors to regain trust and confidence in the industry. During this process it is also important for organisations to share what they learn and feed this back into their business.
Ethical investing has evolved into an approach, rather than a specific technique, and now extends to areas of finance such as current accounts, mortgages and insurance. Choosing ethical financial providers is a growing trend, says the report, that is most marked in the UK, and the Germanic and Scandinavian countries of Europe. The term "ethical" also is slightly nuanced by region, Long Finance points out, with more of a focus on corporate governance in the US, where Europe focuses on "green investment."
In Britain, a report from the non-profit research provider UKSIF shows that assets invested in the country’s ethical retail funds have hit £11.3 billion ($17.7 billion). Over the last decade, the number of “ethical investors” has tripled, from 250,000 in 2001 to three-quarters of a million today, the Long Finance report says.