History of SRI

Historically, SRI in the UK builds upon Victorian social concerns such as temperance and just employment conditions. However, the modern roots of SRI can be traced back to the 1920s when the Methodist Church wished to start investing in the stock market whilst avoiding companies involved in alcohol and gambling. Since then there has been numerous key milestones, such as regulations, movements and initiatives that have fuelled growth in the SRI market. By date order, these include:

 

Pre 1990's – SRI: New funds & new beginnings

1971: Launch of the Pax World Fund, the first ethically screened mutual fund in the US, set up in response to the demand for investments, which did not benefit from the Vietnam War.

1983: The Ethical Investment Research Service (EIRIS) is set up by ethical investment enthusiasts wanting a common source of research on company activities.

1984: Initiatives for the first UK ethical unit trust reach fruition with the launch of the Friends Provident Stewardship Fund.

1988: Launch of the Merlin Ecology Fund (now the Jupiter Ecology Fund), set up in response to increasing concern about environmental issues and sustainable development.

 

1990's – SRI: Creating new laws & boosting dialogue

1991: The formation of the UK Social Investment Forum (UKSIF), set up to bring key SRI figures together to co-operate in sharing knowledge and advancing the SRI agenda.

1997: A group of university lecturers launches the Ethics for USS campaign to promote SRI as a viable investment strategy for their pension fund - as a result USS published its new SRI policy in 2000.

1997: 17% of shareholders vote in favour of a resolution at Shell's AGM regarding Shell's social and environmental policy - engagement becomes a key trend within SRI.

1998: John Denham MP, the then Pensions Minister announces proposals for the amendment to 1995 Pension Act, the SRI Pensions Disclosure Regulation at UKSIF's Annual Lecture in July.

 

2000's – SRI: Entering into the mainstream & extending across Europe

2000: The enactment of the SRI Pensions Disclosure Regulation, under the 1995 Pensions Act comes into force on 3 July 2000. Similar legislation quickly follows in France, Australia, Germany, and Belgium.

2000: Friends Provident adopts a SRI overlay, branded Reo - Responsible Engagement Overlay. The Co-operative Insurance Society (CIS), AMP NPI/Hendersons and Aviva/Morley, quickly follow suit.

2001: The Myners Review of Institutional Investment in the UK is published, advocating shareholder activism.

2001: FTSE launches the FTSE4Good family of social indexes. This follows an earlier introduction of the Dow Jones Sustainability Indexes.

2001: The Association of British Insurers (ABI) publishes new SRI guidelines for companies asking them to report on SEE risks relevant to their business activities.

2001: Launch of Eurosif, the European Sustainable and Responsible Investment Forum, supported by the European Commission and the national Social Investment Forums (SIFs).

2002: Over 250 MPs sign an EDM, which urges the government to enshrine policies in company law to ensure that companies disclose information on the SEE impacts of their business activities.

2002: The Global Reporting Initiative (GRI) advocating international SEE disclosure becomes a permanent institution.

2002: The World Summit on Sustainable Development in Johannesburg, South Africa - involves 150 countries and 700 companies - includes the launch of the "London Principles" of sustainable finance.

2002: The Institutional Shareholders' Committee (ISC) issues a new statement of principles for investors, which include monitoring the performance of and establishing a regular dialogue with investee companies; evaluating the impact of investor activism; and reporting back to clients/ beneficial owners.

2002: The Cabinet Office publishes its Review of Charity Law, which proposes that all charities with an annual income of over £1m should report on the extent to which SEE issues are taken into account in their investment policy.

2003: The Home Office accepts the recommendations made in 'Private Action, Public Benefit', stating that the Government's review of the effectiveness of the legislation requiring pension funds to disclose their SRI policies will inform the framing of the equivalent provision for charities.

2003: The Department of Trade & Industry's Operating and Financial Review Working Group on Materiality publishes its consultation document which recommends that company directors use an auditable process to determine which social and environmental issues are material and should be reported.

 

Further reading:

  • 'A History of Ethical Investment' by Penny Shepherd
    (UKSIF's former Executive Director, which was first published in
    'An Independent Guide to Ethical Financial Planning')
     
  • 'SRI A Global Revolution' by Russell Sparkes (see book review).