‘Backward step’ for sector as Henderson scraps SRI team

The handling of Henderson Global Investors’ SRI funds is to be transferred to mainstream managers. Alex Blackburne spoke to two ethical financial advisors about how this decision will affect the sector.

As if it wasn’t difficult enough to convince people about the importance of sustainable investment, the sector’s job has been made even harder by the announcement that Henderson Global Investors is to close its socially responsible investment (SRI) arm.

It is transferring the management of its ethical funds to regular managers, as it attempts to reduce costs.

Ethical research organisation, EIRIS, will be drafted in as a screening service to make up for the lack of specialist knowledge of the sector.

Julian Parrott, partner at Ethical Futures and chair of the Ethical Investment Association, claimed the news was not what the sector needed right now.

“This is a very worrying development and sends completely the wrong message out about ethical and SRI investment”, he said.

“In the current economic climate, and with increased public concern about how are big businesses are managed, we need more, not less, ethical management teams.”

He’s right. With around 90 ethical funds in the UK, the industry is still very much at a fledgling stage.

It’s riddled with myths and misconceptions about sacrificing performance, putting a lot of people off.

But sustainable, socially responsible or ethical investment is one of the most effective ways to contribute to a blue and green future.

The investments cut out harmful industries such as oil, gas, deforestation, tobacco, pornography and weapons. Instead, your money is invested in ethical sectors – forestry conservation, water management and renewable energy.

A noted proponent of such investment methods, Parrott is worried about the future of Henderson’s once respected SRI funds.

“My concern is that the Henderson funds will not now get the on-going due diligence that they deserve and become sidelined”, he said.

“Henderson has established a substantial place in the SRI community and has significant SRI funds under management.

“A lot of trust has been placed in Henderson and failure to hold true to the values and credentials of the current team’s approach could lead to the recommendation for significant outflows of client funds.”

Christian Thal-Jantzen, an independent financial adviser at Bromige, echoed Parrott’s views.

“All the work that Henderson was doing is out the window”, he claimed.

“No assessment is going to be made of the information that EIRIS will be providing, because they will have no understanding within Henderson of what the information is that they get”.

Thal-Jantzen continued, drawing comparisons between Henderson and two other high-profile investment organisations.

“It’s an absolute disaster, and really is a backward step which is sad.

“They’re going to move into the same category as Prudential and Scottish Widows, that have their token ethical funds which are really a travesty of what ethical investment is supposed to be about.

“They do have an ethical screen, but there is no commitment to what they’re doing and they don’t have any in-house expertise.

“I think we really need to watch that tendency. I just hope it’s not something that’s going to become a trend.”

In the UK, some £11 billion is currently tied up in ethical funds. According to figures released as part of this year’s National Ethical Investment Week, though, 42% of adults in the UK want to ‘make money and make a difference’.

Something doesn’t add up. The key is making the connection between intention and action. This is where Blue & Green Tomorrow comes in.

We want to show you the possibilities of sustainable investment. The closure of Henderson’s SRI team is just one small blemish on an ever-growing industry. Please don’t let it put you off.

There are lots of ways to invest sustainably. So let us help you. Talk to your financial adviser. If you don’t have one, fill in our online form and we’ll connect you to an ethical one. Let your money make a difference.