Financial Services and Markets Appendices to the Minutes of Evidence


APPENDIX 56

Memorandum by the UK Social Investment Forum (UKSIF)

  1. The UK Social Investment Forum's primary purpose is to promote and encourage the development and positive impact of socially responsible investment throughout the UK. Our membership of stakeholders in ethical, green and socially directed investment includes 25 major financial institutions. UKSIF also provides the secretariat for the All-Party Parliamentary Group on Socially Responsible Investment, chaired by Tony Colman MP.

  2. We welcome the opportunity to give evidence to the Joint Committee on Financial Services and Markets. UKSIF has also submitted evidence to the Treasury Select Committee inquiry last November and responded to the Treasury's consultation document.

  3. We were however disappointed to see no mention of our concerns in the Treasury's March progress report. These concerns focus on three key areas: the lack of any mention of the regulator's role in contributing to sustainable development; the need to ensure consumers are educated about the social and environmental impact of their investments; and the need to protect the green and ethical consumer.

  4. There is a growing awareness among some financial services players that our economic future relies on our environmental future, and that the financial sector has a key role to play. The FSA as the new single regulator of the industry should in our view be involved in a debate on what is best practice in sustainable development, i.e., environmental protection, social equity and economic development, and ensure that their activities promote rather than inhibit sustainability.

  5. UKSIF believes the draft Bill should be amended to integrate a regard to sustainable development as an essential element of maintaining market confidence through the elimination of risk in financial services and the draft Bill should make this explicit.

  6. An increasing number of consumers have ethical and social concerns. Green and ethical consumers form a major group within the population. In 1996, MORI identified 41 per cent of the adult British population as green consumers. We believe that FSA's new remit for consumer education should take on board these legitimate concerns and educate people about the choices they can make about where their money goes. The existing clause 4 of the draft Bill should be amended to include a subclause to promote awareness of the range and general nature of impacts and finance on individuals, society, and the environment.

  7. The increase in ethical consumers is also evidenced by the growth in funds invested ethically which has outstripped all unit and investment trusts in every year except one since 1989. In the past two years to January 1999, the total funds managed by ethical unit and investment trusts has almost doubled from £1.1 billion to £2.1 billion according to the Ethical Investment Research Service (EIRIS).

  8. The Financial Services and Markets Bill should make explicit the protection of green and ethical consumers. We believe that the protection of consumers objective as drafted in Clause 5 is insufficient to address this aim and should be amended to include the differing degrees to which consumers wish their ethical, social and environmental concerns to be taken into account in relation to different kinds of regulated activities. Ethical, social and environmental concerns include consideration of the range and nature of impacts of investment and finance on individuals, society, and the environment.

  9. We also hope the FSA will protect the consumer by issuing guidance stating that regulated persons should ask consumers whether they have any ethical, social and environmental concerns which they wish to have taken into account in the financial advice which they receive as part of the routine fact find.

March 1999


 
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