Investments to fit your social views
THE idea that you can change the world through what you buy has been around for a while now. In 1977, the Swiss food producer Nestle endured a boycott over claims its baby-milk products were killing children in third world countries. More recently, the “fair trade” movement has explicitly charged consumers a premium so as to pay higher than market prices to producers in poor countries.
While ethical consumption has taken off, however, the idea of ethical investment has been limited mostly to left wing students protesting about their universities investments in arms dealers or banks.
But that may now be changing. This week, db x-trackers announced the launch of two new exchange-traded funds (ETF) designed for the conscientious investor – one to raise funding to fight disease in the third world and one designed to appeal to Christian investors.
The first, the db x-tracker Global Fund support ETF, is linked to the recently launched Dow Jones Global Fund 50 index. That index tracks the share prices of the top 50 companies that support the Global Fund to fight Aids, Tuberculosis and Malaria – an international project supported by Bill Gates, Kofi Annan and Bono, among others.
And rather like Bono’s RED branded consumer products, the Global Fund ETF raises money for the project by donating any surplus fees after management costs to the fund. Dow Jones are also donating the index licensing fees to the fund.
According to Manooj Mistry, the head of db x-trackers in the UK, “the product is targeted at investors who want global equity exposure – it is highly correlated to other global benchmarks – but this way, you’re helping raise money too”.
Though the companies in the Global Fund index all support the charity, investors may also want to be sure they are investing in companies they consider ethical, however.
For Christians, db x-tracker’s new Christian ETF is linked to an index based on companies selected for their compliance with Christian social doctrines. The index excludes companies which do not meet “predetermined tolerance levels for certain areas of activity, such as for example pornography, strategic and non-strategic weapons, birth control and gambling.”
If Christian investments don’t appeal, iShares also offers an ETF linked to the MSCI KLD Social Index. The index picks companies based on several criteria, including governance, employee safety and labour relations, environmentalism and human rights.
The list of “socially responsible” companies might surprise some left wing anti-corporate investors, however. The index is made up of 90 per cent large cap companies, including Microsoft, IBM and Pepsico. The index has also outperformed the S&P 500 over recent years too, proving that (at least a little) goodness is profitable.
Which is more than can be said for evil. An American ETF called the “SINdex”, which invested exclusively in liquor, gambling and tobacco stocks, closed down in 2008. Evil minded investors now might have to just buy individual stocks.