Public Servant Lifestyle

The South African system of apartheid arguably gave ethical investment its biggest ever boost. We take a look at it's origins.

The history and development of ethical investment generally is surrounded by much speculation and many opinions about it's origins. Some argue that ethical investment has been in existence for hundreds of years. Social historians Melton and Keenan cite the Quaker withdrawal from any activity involving the slave trade in the 18th century.

The Pax World Fund

Other opinion suggests that the movement 'grew up' in the 1960s, when students started questioning the use of university funds to help finance the Vietnam War. In 1971 a group of methodists set up the Pax World Fund, primarily to avoid investment in the war, though it also refused to invest in tobacco or gambling.

However, it was the South African system of apartheid that gave ethical investment its biggest boost. While the issue was on the agenda of many trade unions and church funds through the 70's, it was in the 1980s that the movement to keep money 'clean' took off.

In the United States, states such as Massachusetts and New York instructed their pension fund trustees (controlling assets amounting to billions of dollars) to take account of the situation in South Africa. In 1986, California, with control of $50bn, divested from South Africa.

The South African Experience

The South African experience, which has been claimed as a victory for ethical investment (among other factors), caused ethical investment to become "...an accepted principle in the commercial world, largely pioneered by anti-apartheid action."

In the UK, church funds have had ethical guidelines since 1948, but it was not until 1983 that the Department of Trade granted permission for such funds. It had previously believed that a fiduciary responsibility could not be mixed with a broader social responsibility.

In 1984, investment provider Friends Provident, which had originally been founded on Quaker principles, launched the Stewardship Fund. In 1985 three more funds were established, one more in 1986 and four each in 1987-1988.

There are now eighteen publicly available funds that can be broadly considered 'ethical' in the UK.

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