Ethical finance and investment is growing momentum globally and nationally at an exceptional pace. Previously principally the remit of specialist finance providers and investors supporting enterprises with an environmental or social purpose, it has morphed into the mainstream with an ever increasing recognition of the importance and value to finance providers and investors of taking into consideration in their decision making processes environmental, social and governance (ESG) factors.
It is estimated by GEFF that there are USD 27.89 trillion of assets under management globally on an ethical basis and that faith based investment will rise to USD 3.5 trillion by 2021. This is a huge and growing market with retail and professional investors increasing recognising that ESG factors have a material role to play in determining risk and reward.
Gone are the days when ethical finance implied lip service to the relevant factors. Investors and finance providers now recognise that an ethical approach can result in enhanced returns to investors. Take for example SEDCO Capital's stated 'prudent ethical approach' to investment, linking Shariah compliance with ethical investment in order to maximise performance and return. SEDCO is not applying ethical principles simply to be green or to comply with faith based requirements, but because it is in the best financial interest of its investors.
As the investment and finance market has developed, ethical principles are increasingly being seen as the new normal providing essential tests to underpin investment and finance decisions. Increasingly, funds and lenders are being challenged when they are perceived as failing to apply suitable ESG factors in their decision making. A good example is the criticism by the OCED of the Norwegian Pension Fund's ethical strategy. Such challenges and criticism are becoming increasingly common and investors and finance providers are looking to increasingly sophisticated solutions to ensure compliance with appropriate ESG factors.
Scotland has of course been at the heart of the ethical and sustainable finance movement since the beginning of the nineteenth century as highlighted by the opening of the world's first commercial savings bank in 1810 by the Rev. Henry Duncan followed shortly thereafter by the formation in 1815 of Scottish Widows, Scotland first mutual life office. The principles of ethical and sustainable financing have continued to hold weight down to the present day, with the formation of the Scottish Ethical Finance Hub in Edinburgh with the aim of helping SMEs to access ethical finance and with Scotland again hosting the Global Ethical Finance Forum in 2017.
We are therefore ideally placed to provide thought leadership and practical support in relation to the provision of ethical finance including the financing of major affordable housing and regeneration projects both at home and internationally, advising on renewables and green energy based projects as well as advising on real estate and other investments and projects funded on a faith based basis.