Barnet Council's unethical investments

Barnet Green Party is calling on Barnet Council's pension fund to scrap its immoral investment policy and to adopt the United Nations Principles for Responsible Investment.

The council stated last year that it holds 724,575 shares in BAE Systems, the weapons manufacturer which has recently been the subject of an investigation by the Serious Fraud Office in relation to alleged bribery.

Year-end figures show that the fund's holding of BAE shares brought a poorer return in 2006 than if the money had been put into ethical investments. Growth in the FTSE4Good Global 100 index, a leading tracker of ethical investments, was much greater in the past 12 months than the rise in BAE shares.

"Barnet Council's previous excuse was that the pension fund has to achieve the best possible investment returns for its members. These figures show that investing in BAE makes poor investment sense as well as being immoral," says Gardi Vaswani, chair of Barnet Green Party.

BAE stock ended the year 11 pct higher than on 31st December 2005, as institutional investors cynically welcomed the government's decision to order the SFA to end its bribery inquiries.

However, the FTSE4Good Global 100 index did much better, surging nearly 20 pct during 2006, justly rewarding people who chose to invest in a principled way. Some other measures of ethical investment even outshone the FTSE4Good Global index, depending on the method of calculation. The Dow Jones EURO STOXX Sustainability 40 has soared more than 26 pct in the past year.

The FTSE4Good Global Index achieved a similar outperformance against the FTSE 100 index of leading UK shares, which gained about 10 pct in 2006. The more narrowly-focussed FTSE4Good UK index matched the FTSE 100's gain, despite the limited number of companies in the UK from which the ethical index's components can be selected.

The UK has trailed behind other European countries in developing ethically acceptable and environmentally friendly industries, undermined by attitudes such as that of the Barnet Council pension fund. This means that Britain is lagging behind in obtaining the economic benefits that such industries are bringing to more forward-looking countries, both in terms of job creation and return on investment.

For instance, Denmark is home to Vestas Wind Systems, the world's biggest manfacturer of wind turbines. Vestas employs 11,900 people and has seen its share price more than double in 2006, to 229 euros from 104.5 .

If Barnet Council's pension fund adopted a more ethical policy, such as by following the UN guidelines, it could achieve a double benefit of improving the fund's investment returns and, if it invested in appropriate UK companies, it could help encourage faster growth in ethical business sectors in this country.

The introduction of the guidelines also deals with the council's previous concern that there was no standard set of ethical investment rules which it could follow. The BBC is among organisations which have adopted the UN rules, so there is no reason why another public body such as Barnet Council should not do the same.