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EDITIONS
Wednesday, 31 July, 2002, 07:12 GMT 08:12 UK
Losing money with a conscience
A Greenpeace ship protesting outside Japan's Takahama nuclear power station
The nuclear industry is one of the 'bad guys'.

Turning an investment of 1,000 into just a few hundred pounds has never been easier.

With stock markets lurching downwards, the vast sums poured into company shares have shrunk before investors' eyes.

But the people who put their money into the FTSE group's new ethical indexes can at least console themselves with the thought that their losses bear the stamp of social responsibility.

Unfortunately, that social responsibility has actually made the losses greater because tobacco companies and arms manufacturers - whose shares have been holding up during the stock market falls - are barred from the ethical indexes.

'Big success'

FTSE4Good was launched with much fanfare a year ago.

The aim was to give investors the choice of putting their money into companies that met targets on environmental sustainability, social issues, stakeholder relations and human rights.

If it wants to be a truly ethical index it's got to toughen up its act and not include for example Shell, BP and the banks

Alan Kirkham
Investing Ethically

In the turbulent market trading since the launch, FTSE4Good UK has lost 30% of its value, while shares in the FTSE 100 index of blue-chip companies have fallen 28% over the same period.

But Gareth Parker, head of global research for the FTSE Group has no regrets: "It's an even bigger success than we expected it to be," he says.

How can an index which has lost nearly one-third of its value be a big success?

A trader on Wall Street
Investors want to make money and be 'green'.

Mr Parker says he is measuring the success by the amount of investor interest there has been and also the wider interest that has been created in ethical investing.

And he insists the new indexes - there are eight in all - have performed broadly in line with their wider benchmarks.

Mr Parker says that for UK shares the most accurate comparison with the FTSE4Good UK index is the FTSE All-Share. Using this measure, the ethical index lags by just over 1%.

The bad guys

"The launch timing was awful because of what's happened on the markets," says Peter Earle, an ethical investment adviser at Holden Meehan.

It's a shame the market hasn't been going up, none of us like to see it going down

Gareth Parker
FTSE Group

But he says more and more investors are concerned about what sort of trade their money is funding.

And although FTSE4Good is what might be called the very lightest shade of ethical green, it does exclude the businesses which cause investors most concern.

"Tobacco, arms and nuclear power seem to be the 'bad guys'," he says.

In that sense, FTSE4Good has found a ready market.

Tougher rules

But Alan Kirkham, of the independent financial advisers Investing Ethically, is one of critics who thinks the entry levels for FTSE4Good need to be much more stringent.

"One would hope that it's a first step and not a cynical exercise, but it's a first step on a very, very long road.

Royal Marines during an exercise
Ethical investors shun arms makers

"If it wants to be a truly ethical index it's got to toughen up its act and not include for example Shell, BP and the banks."

The FTSE group has always denied the accusation that its entry levels are not tough enough.

Mr Kirkham says the best thing about FTSE4Good is that it has drawn more attention to ethical investing.

And, he says, the ethical indexes have held their own against the wider market: "Whether you are losing 30% or 28.5% it doesn't make a lot of difference, you're still losing."

Green concern fades

Elissa Bayer, private client director at the stockbrokers Gerrard, says the fact that the indexes exist encourages more clients to invest ethically.

But she says that in the falling markets it has been noticeable that fewer people have been concerned about 'green' investments.

FTSE's Gareth Parker insists the timing was right for last year's launch because the market wanted ethical indexes.

"It's a shame the market hasn't been going up. None of us like to see it going down."

But even in the midst of the volatile share movements, New York's Nasdaq is planning to launch its own ethical index in the autumn.

 WATCH/LISTEN
 ON THIS STORY
Gareth Parker, FTSE Group
"Some of the companies that have been excluded are traditionally defensive stocks."
Peter Earle
"Ethical investment funds have struggled."

Analysis

IN DEPTH
The Markets: 9:29 UK
FTSE 100 5760.40 -151.7
Dow Jones 11380.99 -119.7
Nasdaq 2243.78 -28.9
FTSE delayed by 15 mins, Dow and Nasdaq by 20 mins
Launch marketwatch
View market data
See also:

25 Feb 02 | Business
05 Aug 01 | Business
12 Feb 02 | Business
10 Jul 01 | Business
10 Jul 01 | Business
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