Ethical funds backing weapons and tobacco trade

Private Swedish investors who choose so-called 'ethical funds' could be pouring their money into weapons, tobacco and booze, according to an investigation by the Fair Trade Center.

“Our study shows serious failings in the marketing of ethical funds,” said the organisation’s Henrik Lindholm.

Over a hundred Swedish funds are described as ethical in their promotional material. But the study’s results, which will be published in the next edition of consumer magazine Råd & Rön, show that half of the ten fund managers investigated do not follow the rules of the Ethics Committee.

In the last ten years the number of ethical funds in Sweden has increased tenfold.

Most of the funds claim not to invest in companies which handle weapons, alcohol and tobacco. In practice that means that they set a limit to the percentage of the company’s turnover which comes from such areas.

As a consequence, 90% of the funds examined included shares in Ericsson – one of Sweden’s largest military producers.

“Just because a fund owner says the fund is ethical, there’s no guarantee that they only invest in companies [which avoid these areas],” said Lindholm.

“Several of the funds are committed to excluding a few companies within undesirable industries such as tobacco, alcohol and weapons, but then they don’t check the rest of the companies when it comes to human rights and the environment.”

Nevertheless, Lindholm noted the positive development of fund owners beginning a dialogue with companies to encourage them to improve their ethical record.

“As shareholders, people have the opportunity to influence companies positively,” he said.

Among the fund managers which the Fair Trade Center said did not provide adequate information were three of Sweden’s largest banks, SEB, Nordea and Handelsbanken.