eFinancialCareers

Step aside tree-hugger, socially responsible investment (SRI) has entered the mainstream and is tipped to expand even more.

It’s business

Gone are the days when banks and asset managers played lip service to SRI, or when ethical investment was the domain of the bearded lefty.

The estimated total fund value for SRI/ethical retail funds alone in the UK is £8.9bn, according to Ethical Investment Research Services – up from £3.8bn five years ago. The total European SRI market grew from €1trn in 2005, to €1.7trn in 2007, according to financial research firm Celent.

And investment banks like Citigroup, Goldman Sachs and JPMorgan aren’t going to invest in SRI because of sentiment – clearly there is money to be made. Goldman said that its GS Sustain investments outperformed the MSCI World Index by 25% last year.

Asset managers and pension funds have flocked to sign up for the United Nations Principles for Responsible Investment, which means appetite for ethical products has swelled.

Go mainstream

Investment banks are increasingly rolling out environmental funds, which look to maximise returns through good investments rather than simply vetting bad ones, as has traditionally been the case.

Asset managers such as F&C Investments and Dexia Asset Management have sustainable investment funds that take a more active approach still.

Robert Barrington, director at F&C’s governance & sustainable investment (GS) team, says the firm uses a thematic approach: “Take a subject like climate change, for example, and look for real winners from this scenario – alternative technology firms, for example – and identify these as investment opportunities.”

The specialists

While ethical issues are a concern in mainstream banking they don’t want to sacrifice maximum return on investments because of them. Specialist ethical banks like Triodos and Rathbone Greenbank, however, like to offer a blend of returns and social benefits.

Alexandra Connor, investment manager – investor relations, at Tridos, says: “We would focus on the more niche areas like sustainable organic farming or fair trade and would offer a more modest return than a lot of environmental funds, in exchange for the social contribution.”

Entry routes

Sadly, very few places will train you to work in socially responsible investment. Connor, for example, started her career at UBS.

Isabel Kwok, investment manager at Rathbone Greenbank, says they are rolling out a grad scheme this year, but it’s only available to one lucky student who makes it on to the summer internship.

F&C tells us that trainees on the graduate scheme have made it to the GS department, and though these have come from a range of academic backgrounds, a masters or a thesis on a social or environmental issue is an advantage. Most started their careers in investment banks, charities, government organisations or environmental NGOs.

Triodos takes graduates but doesn’t have a formal scheme. Clearly, this is an area to specialise in, something to move into once you’ve got your financial wings, so what do they look for?

Skills

James Burnham of specialist investment bank and asset manager, Climate Change Capital, says the fundamental discipline is the same as investment banking: “We don’t want to be tarred with the ‘green’ brush. We invest in companies that will ultimately reduce greenhouse omissions, either directly or indirectly. When we take people on, we want them to have investment banking skills that can be applied to this sector.”

F&C’s Barrington says they’re looking for people who understand environmental issues and can frame them in terms of the financial markets: “For example, how the issues and complexities of human rights in Sudan might impact companies, or how climate change legislation relates to a utilities company. We’re not an NGO, so we’re not taking on expert environmentalists.”

On the more specialist side, Triodos’ Connor says a charitable background can prove an advantage when assessing the social impact of investments.

What to do next

The Rathbone Greenback internship deadline is 6th May and you can apply through the Bristol University careers website. Click here to get more details about Triodos Bank or Climate Change Capital.

If you’re after more info on the green sector, it might be worth heading along to the first National Ethical Investment Week which runs from 18-24 May and is organised by the UK Social Investment Forum. It’ll be a good opportunity to network with all the major players.