Explaining and Exploring Sustainable Investment - Flipbook - Page 4
A short history of sustainable investing
Roots in religion –
back to the
1800s
(or beyond)
The earliest ideas behind sustainable or socially
responsible investing can be found in the ideas of
the Methodists and Quakers in the 1800s around
temperance and fair employment conditions – and
some might argue even further back in the principles
of Sharia.
1960s
Fast forward to the 1960s and broader demand for
ethical investment started to take off in the US, with
widespread aversion to companies involved in the
Vietnam War. This culminated in the launch of the
PAX fund in the early 1970s, regarded as the first
proper ethical offering.
Whatever the provenance, the founding idea
focused on shunning profit at the expense of your
neighbours and therefore avoiding investment in
areas that made money through alcohol, tobacco,
weapons or gambling – the earliest version of what
became known as negative or dark green screening.
A changing corporate landscape
Twenty years ago, it was very unusual for investors
to ask companies about their environmental
impacts, supply chains, corporate governance
or treatment of employees. At this stage,
the sustainable team would typically have a
couple of minutes at the end
of meetings with company
management to probe these
areas and encourage better
practice. Reactions tended to
vary: some management teams
got it, recognising these issues
were important to the company’s longterm success; others were patronising or
even aggressive.
Back then, it was simply not widely accepted that
companies had to report on or improve their ESG impacts.
4 - Liontrust: Explaining and exploring sustainable investment
Today, the picture is very different with almost all listed companies
reporting on corporate social responsibility and ESG. A landmark
came in 2019 when the usually conservative US Business Roundtable
issued a new statement on the ultimate purpose of corporations.
Since 1978, the Business Roundtable has periodically sent out its
Principles of Corporate Governance and each version since 1997
has endorsed shareholder primacy – that businesses exist principally
to serve shareholders. In 2019, the Roundtable broke decisively
away from this and included a commitment to all stakeholders for
the first time, not just shareholders but also customers, employees,
suppliers and wider communities.
One of the chief executives supporting this change, Progressive
Corporation Head Tricia Griffith, said: ‘CEOs work to generate
profits and return value to shareholders, but the best-run companies
do more. They put the customer first and invest in their employees
and communities. In the end, it’s the most promising way to build
long-term value.’
