Hugh Wheelan reports from the Investment and Finance Forum in Lausanne

The marriage of ethical and financial investing within pension funds should be seen not only as a beneficial relationship for society and the environment, but also as a tonic to investment performance, declared Dominique Bidermann, director of Ethos, the Swiss foundation for sustainable development in investment, at the fourth annual Investment and Finance Forum in Lausanne, Switzerland earlier this month.

The message needs to go out that non-performance criteria in investing can bring about higher returns and a greater competitive edge, as well as respecting social aesthetics and preserving the planet for future generations. The proof can be seen in Anglo-Saxon funds, which for years have outperformed the market with an ethical agenda," Biedermann announced.

He pointed out that social, economic and ecological efficiency sought to use minimum resources for maximum profit and produced the least amount of waste possible.

It also fostered a climate of social cohesion and stability, which he said gave added value to companies in the long run and boosted share prices.

"The advantages stretch further too, because by taking responsibility for social and ethical actions, funds can avoid excessive legislation from authorities, which is becoming greater as these issues hit the forefront of social conscience," he added.

Through such action, funds can be both one step ahead of government and more importantly, in control of their own destinies, he pointed out.

Citing the example of the few washing powder companies which had been the first to take the bold step of removing phosphates from their products; a move followed by market competitors several years later, he offered an example of environmental initiative which had been maligned for a time, only to result in a massive competitivity boost and increased market share down the line.

"Institutional investors, particularly in pension funds, would do well to study the example, because despite the short term restructuring costs, the long term benefits will far outweigh them.

Customers and clients are becoming increasingly well-informed and de-manding when it comes to ecological and social matters, and if funds don't want to find themselves on the receiving end of a social and economic backlash, they would be wise to start considering these issues immediately," Biedermann noted.

Biedermann's views on increasing responsibility within pension funds were compounded in a speech by Corinna Arnold, director of the Global Shareholder Services investor responsibilty research centre in Washington DC.

"In the US there are a proliferation of pension funds now pursuing socio-ethical policies and addressing issues of corporate governance, in marked contrast to the dogged quest for performance at any cost during the 1980s."

She continued by saying that 'act-ivism' within schemes was no longer considered as meddling in micro-management, but rathermore as an aid to macro-economic policy. "In-vestment performance is not being damaged so no-one is getting hurt, but we are seeing social responsibility taking off in a big way which is influencing institutional investors in the US economy as a whole."

A further speech by Dr Elisabeth Stern, president of the board at VTZ, whose motto is 'green money for the blue planet', produced the results of a recent study in the US on ethical investment to back up the call for greener money management.

Stern said the study, published in both the Wall Street Journal and Washington Post, found that funds improving their environmental management system and performance could increase their stock price by as much as 5%. For a firm with capitalis-ation of $1bn this represented an increase in wealth of up to $50m.

"Socially responsible business be-haviour clearly enhances financial performance and creates benefit for shareholders and stakeholders," Stern concluded. "

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