Ethical funds: a lot of bark but not enough bite? - A comparison and investigation of Swedish ethical funds

Abstract: Background and problem: There has been an increase in social and ethical investments and this increase can be due to many reasons such as growth of investors’ concern, growth of corporate social responsibility and growing evidence that ethical funds produce good returns as reasons to the increase of ethical investments (Schwartz, 2003). Through research of the literature we find that what qualifies as an ethical fund is not clear. This makes it difficult for the customer to understand on what grounds the companies are excluded or included in the fund. That is, if almost all companies fall under the requirements of the ethical fund, then there is basically no difference between an ethical fund and a Swedish main stream average fund (non-ethical fund). Purpose: The purpose of this thesis is to investigate the ethical funds’ processes from the targeted banks, what the requirements for the companies to be included in an ethical fund are, if the banks’ differentiate from each other and which companies are not suitable to be included in an ethical fund. Delimitation: The thesis is delimited to only include Swedish ethical funds provided by Swedish banks. Method: The method used to investigate ethical funds, the exclusion of companies and the comparison of the banks was through semi structured interviews with representatives from the targeted banks and their ethical advisors. The interviews were performed through e-mail with the banks, personal interview with two of the ethical advisors and telephone interview with Swedbank Robur. The five banks included in the study are Danske Bank, Handelsbanken, Nordea, SEB and Swedbank. The ethical advisors are Ethix, GES Investment Services and Swedbank Robur Internal Screening Department. Results and conclusions: The authors found that the targeted banks consult their ethical advisors or, in Swedbank Robur’s case, have their own internal process regarding the process. The process can for all banks be applied to four steps; objective, screening criteria, data collection and evaluation (Reich, Wolff, Zaring, Zetterberg &Åhman, 2001). It was also concluded that there is no significant difference between an ethical fund and a non-ethical fund since only a few companies were excluded from the funds’ ethical screens, with the exception of Robur Ethica Sverige Mega that excluded half of the companies at the Swedish Stock Exchange.