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Mid-summer madness

There seem to be signs of it all over the place, the only question is where to start.
Okay I could start with the usual concerns - Why are long term bond interest rates so low? How low a real yield will investors in index linked bonds accept? Why have equities recovered so much with US interest rates still rising and many commodity prices at record highs? Just how high can oil prices go? Why has the dollar gained so much ground against the euro when the US is running such a high deficit? Why would anyone want to buy a 50-year bond with so many uncertainties in the world? Is it madness to assume China can keep growing forever at the same rate? Why does the old saying “sell in May and go away” work so often?
All of these are perfectly legitimate concerns but also far too important questions for me to be able to answer in a short column, even if I had the answers, so instead let me raise a couple of issues that may have passed you by.
Let me start with what I consider one of the more worrying examples. Intolerance, in any area is a concern but when the Animal Liberation Front starts firebombing again, any fund with any exposure to pharmaceutical company shares should start getting worried. Apparently, the chief executive of Phytopharm, a small pharmaceutical company, said in June that he was “frankly despairing”, after the company’s broker resigned following a firebomb attack by animal rights activists.
The difficulty is of course that all pharmaceutical companies whether they like it or not have to test on animals if they want their drugs licensed. The irony is the chief executive of Phytopharm, a Mr Dixey, whose company is attempting to find a cure for Alzheimer’s Disease, uses extracts from plants and is a Buddhist. He was quoted in the press as saying, he said he had “spoken to lots of wise people” about the concept of testing drugs on animals. “I believe it is ethically sound to do limited animal testing,” he said.
If stockbrokers start resigning again, I have to wonder if investors and especially pension fund investors will hold their nerve.
I would also be rather worried if I were a customer of the Co-operative Bank. On their website the bank say they have an ethical policy which was introduced in 1992 . When looking to determine ‘what ethics to embrace’, the bank say it was necessary to consider ‘whose ethics to embrace’. The bank say they chose to base its ethical policy on the concerns of its customers, on the basis that it is generally their money that is being used, and they should have a say in how it is used.
The bank says that it is the only high street bank that gives customers a say in how their money is used and which encourages their input into the ongoing development of its ethical policy. This policy now appears to be changing. Judging from their actions in asking a Christian group to take its business elsewhere, it actually wants to know what its customers ethics are, so that if they don’t coincide with the banks’ own standards it can sack the customer.
The Co-operative Bank has reportedly asked an evangelical christian group to close its account because of its homophobic views. Apparently, the bank, wrote to Christian Voice in early June asking it to find a new bank after they decided the groups views on homosexuality were too extreme.
“It has come to our attention that Christian Voice is engaged in discriminatory pronouncements, based on the grounds of sexual orientation,” the letter said. “This public stance is incompatible with the position of the Co-operative Bank, which publicly supports diversity, in all its forms, for our staff, customers and other stakeholders.” Stephen Green, national director of Christian Voice, said the group was the victim of religious discrimination.
You may agree that homophobic views are reprehensible but once this sort of business selection starts one has to wonder where will it end. I do hope the Co-operative Bank does not probe the ethics of all its customers too closely – they may end up with very few customers.
The problem with ethics is that we all tend to view ethical issues very differently. Thank goodness that the term ethical investment has gone out of fashion, socially responsible investment and sustainable investment are much more explainable and I believe responsible terms.
Not everyone will necessarily agree with the issues that can be defined to be socially responsible or sustainable but at least they can be better explained and understood. The one thing I will forecast is that socially responsible and sustainable Investment will be, whether you like it or not, much more important in the future than they have been up until now.

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