25th October 2006, By Katie Langridge, Insurance Business Review onLine
http://www.insurance-business-review.com/article_feature.asp?guid=7D7281BF-3380-4192-BAA8-7CC878489B66

Ethical funds are expected to continue growing in popularity in the coming years.

Socially responsible investing or ethical funds have never been so popular. The European ethical wealth management market is now worth E1 trillion, and ethical wealth management looks set to grow in popularity. Indeed, it appears ethical wealth management is not just a fashionable fad, and impressive returns suggest it will become a significant feature of Europe's wealth management landscape.

'Content Ethical wealth management is not new, but over the past five years, wealth managers have noted increasing levels of client interest in investment or banking propositions that are socially responsible, or that offer sustainable investing. Managing wealth in an ethical way has always been popular with certain niche client groups, but general public awareness of global environmental and social problems has increased, thanks to high profile charity campaigns and increasing activism.

Eurosif estimates that the European ethical wealth management market is now worth over E1 trillion, and is growing above the rate of the overall European equity markets. The vast majority of the total value of the European ethical wealth management market is being generated by so-called 'broad' socially responsible investing (SRI), which grew by 36% above the Morgan Stanley Capital International Indices Europe between 2003 and the end of 2005.

The total SRI market in Europe is currently dominated by the UK, which accounted for 71.3% of the total market at the end of 2005. The size of the UK's lead in SRI compared with other European markets is due to the size of the broad SRI market in the UK, however. Core SRI in the UK is worth E30.5 billion, while the broad SRI market is worth E781 billion.

As the ethical lifestyle becomes increasingly fashionable, many leading financial firms are creating and developing a range of ethical, or socially responsible, products for clients. This extends beyond wealth management into areas such as mortgages and pensions, and indeed pensions companies are some of the institutions most likely to invest ethically.

Due to the strong returns offered by ethical funds, particularly in the longer term, and the increasing inclusion of ethical factors in standard financial management portfolios, ethical wealth management looks set to make a long-term impact on the industry. Leading ethical banking providers with wealth offerings covering a wide range of product areas, and with a well-publicized ethical stance, such as that of the Co-operative Bank, stand to gain tremendously from the ongoing move towards this form of wealth management.