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IN 1986 Simply Living magazine ran an article on ethical investment which elicited more letters from readers than any other article since the magazine had started.

Following the article, the then-editor of Simply Living, Verna Simpson, and Geoff Young (then secretary of the Earthbank Society) appeared on Ray Martin’s Midday Show and talked about ethical investment.

As a result, Simply Living received 500 more letters asking for information about this new form of investment.

The Earthbank Society’s (a brainchild of Bill Mollison from the Permaculture Institute) experience over many years has been similar to that of Simply Living. That is: a lot of people out there want to know more about ethical investment. Recently, market research done by Community Aid Abroad and a major banking organisation has reaffirmed this high level of public interest.

Investment still at low level

The level of ethical investment in Australia is, however, tiny compared with the overall level of investment in Australia, with an estimated $14 million in ethical insurance and superannuation products, $7 million in ethical unit trusts and about $10 million in a range of community based ethical Credit Unions and other localised funds. Church investment funds with often very weak or vague ethical investment criteria applied could be estimated at a further $300 million plus.

One of the main reasons that ethical investment has not been particularly successful in Australia is because the investment industry’s response to ethical investment has been generally somewhere between icy cold and luke warm. Growing environmental concerns has meant an ever-increasing interest in ethical investment but major investment house IPAC continues to claim that they have never had a client even express an interest in ethical investment.

Money Matters is born

Early in 1989 Edwin Macpherson, an experienced investment consultant, contacted Robert Rosen, Secretary of the Earthbank Society, about what could be done to help ethical investment really get off the ground in Australia.

The strategy they decided on was to set up a major Australia wide network of specialist highly competent ethical investment planners, who were personally committed to the ideals of ethical investment and had a good understanding of the important social and environmental issues of our time.

The outcome of their meeting was Money Matters Financial Group Pty Ltd, a licensed security dealer specialising in socially and environmentally responsible investment. Money Matters commenced operations in February 1989.

Edwin and Robert realised that the main weakness in the ethical investment market was a lack of appropriate insurance and superannuation opportunities for most socially responsible investors — early starters in ethical investment life insurance Friends Provident having backed themselves into a corner by alienating almost every ethical investment adviser and commentator in Australia with their policy of investing since 1986 in such companies as BHP, Comalco, Bouganville Copper, Boral, Wespac, ANZ, NAB and Amcor.

MoneyMatters thus turned to another life company, Occidental, and assisted them in setting up the Occidental Environmental Opportunities Fund.  MoneyMatters continues to act as advisers to the Environmental Opportunities Fund assisting in the selection of appropriate investments.

One of the other major impediments to the growth of ethical investment in Australia was seen as a lack of people’s confidence in the security and returns that ethical investments can give as well as a lack of trust in the investment industry generally. MoneyMatters thus consciously put together a formidable team who between them had a solid track record in the investment and finance industry, ethical investment and social and environmental activism.  The team included:

• Edwin Macpherson (Managing Director)
• Robert Rosen (Social/Environmental Research)
• Greg Tarplett (Insurance/Superannuation)
• Martin Myers (Financial Research)
• Mical McCann (ACT )
• Kevin Childs (Northern NSW).

Growing rapidly at a time when most investment advisory firms have been finding the going hard, MoneyMatters now has an office staff of six plus eleven fulltime investment consultants and acts as advisers not only to individuals but also to community and environment groups, banking organisations and fund managers.

The company sees itself over the next few years as becoming more closely involved in the funds management side of the investment industry to help maximise the flow of investment funds into areas which can really make a difference, such as the co-operative sector, low cost housing, decentralised communities and environmentally appropriate technology.

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THE EARTHBANK SOCIETY was an initiative of Bill Mollison, founder of the permaculture movement. In 1982 an Alternate Economic Summit, initiated by Mollison, was held in Tasmania. Although only a dozen or so people attended, two major initiatives emerged out of that conference:

• one was the Maleny Credit Union which Jill Jordan took on the task of helping set up
• the other was the Earthbank Society.

A year earlier after attending a permaculture design conference run by Bill Mollison, Damien Lynch had set August Investment Pty Ltd, Australia’s first ethical investment company. Damien went on to establish August Investment Management Ltd (Now Australian Ethical Investment Management Ltd), the first ethical investment funds manager in Australia.

Robert Rosen

Earthbank was set up by architect and permaculture designer, Geoff Young, and provided the financial and economic philosophy to go hand in hand with permaculture’s permanent agricultural systems. Its original objectives were:

• to increase awareness of the steps required to create a sustainable economic future
• to assist in the economic revitalisation of local communities
• to promote the concepts of social, ethical and community based investment
• to provide assistance and support to financial organizations which adopt social, ethical and environmental investment criteria.

In practice, so far much of its work has been devoted to the last two of its objectives. Geoff Young helped bring ethical investment to the attention of the media in Australia with early major stories featuring Earthbank and ethical investment appearing in the financial press,  radio and TV.

He produced the Earthbank Ethical Investment Guide and answered many enquiries about ethical and community investment. Geoff also contributed a regularly to the International Permaculture Quarterly on a wide variety issues associated with community economics and ethical investment.

The idea spreads

Also at Bill Mollison’s initiative, an Earthbank Association was set up on the US West Coast. It took on a high profile and was helped setting up a socially responsible Credit Union in California’s Puget Sound area. It work was highly regarded and produced the widely read Sustainable Economics Guide.

The Association ceased its activities in 1987.

In Australia in 1986, Geoff Young convened the very successful first National Earthbank Conference in Sydney . Later that year, Geoff moved from Sydney to Queensland to help set up Crystal Waters, a rural village development which is based on permaculture principles.

Robert Rosen, working from the North Coast of NSW, took over from Geoff Young as secretary of the Society. In late 1986 the Earthbank Society prepared the feasibility study for the Bellingen District Loan Fund Ltd, a community based socially and environmentally responsible loan fund which was established in the following year.

In 1987 the Earthbank Society started receiving an increasing number of enquiries from prospective ethical investors and was regularly fielding media enquiries and doing radio interviews. This was partly in response to the establishment of the first two ethical managed funds in Australia in 1986-7.

In 1987, a second very successful Earthbank Conference was held in Sydney, with Roger Pritchard from the United States, an authority on community-based economics and investment as its keynote speaker. Also in that year Earthbank Society of WA was formed

Coinciding with growing community awareness in environmental issues, interest in ethical investment increased dramatically in late 1988 and the Earthbank Society began began receiving enquiries not only from the media and interested investors but also from investment advisers, fund managers, banks, insurance companies and stock brokers. After one radio interview on Carolyn Jones’ In Search for Meaning on the ABC, the Society received over 250 letters.

AFTER MORE THAN 20 years in the world of money, Damien Lynch wants more of it. He wants it not for selfish reasons, but to bring to life a project which would combine both profit and environment. Damien’s project, August Ecoforests, is the culmination of more than 18 sometimes difficult years pioneering the ethical investment industry in Australia.

Damien Lynch, social investment entepreneur

Although a baby in the investment world, ethical investment has now established itself and is attracting socially and environmentally caring investors, people who are prepared to financially support the works they believe in.

Writing in his 1996 publication Ethical Investment in Australia, Trevor Lee put at over $100 million the value of funds invested in ethical entities in Australia, outside of church based funds. His book identifies a total of 28 ethical investment options. These are no fly-by-night financial operations – they are regulated by the same corporations and credit union laws as the big money players.

Damien was present at the birth of the ethical investment industry and has played a leading part in its development.

Up in the rafters

I spoke to Damien in the modest, turn-of-the-century house he and his partner occupy in Sydney’s inner west and was greeted at the door by two his yapping dogs. Clearing them away, he leads me down a long hall, through a small, tidy kitchen to a table and chairs occupying a covered sitting area in a pocket-sized garden.

Our initial small talk reveals an acute financial and socially concerned mind at work under that head of dark, tangled hair now starting to grey at the edges.

“How did you discover ethical investment”, I ask Damien. He replies that he almost fell into it from the rafters.

“I was up in the rafters, building the convention centre which is now Ontos. The very first booking they had was for a group of who had organised the second ever Permaculture design course. That was in 1980″. Damien enrolled in the course and was inspired by Bill Mollison, the man who, with David Holmgren, had only a few years earlier ‘invented’ Permaculture.

Bill’s proposal that people should use their money to create their own financial institutions caused controversy among the students, but to Damien it was a revelation.

A new phase

Now, things started to happen. Inspired, Damien and three or four people from the course formed a company and named it after the investment club Damien had been a member of and which had been formed during the month of August. In 1981, August Investments, Australia’s first ethical investment company, was born.

“We wanted to do general sorts of investment but put 20 percent of our investment funds into permaculture projects”, Damien explained, sitting back in his chair and turning his eyes skywards as he recalled those heady, exciting days of eighteen years ago. “To my surprise I had two or three people over a period of two months knocking on my door… they wanted to invest in the new company, yet we had made no attempt to market August Investments… it just grew and grew…”.

Soon the legal limit of 50 investors was reached and, to allow investment to grow, a unit trust and management company became a legal necessity. “So we set about organising that. It became Australian Ethical Investments”.

1981 was a significant year for the nascent ethical investment industry. In that year, the formation of August Investments was followed by Maleny Community Credit Union in Queensland and by Southern Cross Capital Exchange in Sydney. There was already the Macauley and Fitzroy credit unions set up by the Brotherhood of St Lawrence in Melbourne, with a focus on assisting low-income people in those areas. August Investments was the first in the world, as far as Damien knows, to have a positive focus in identifying things they intended to invest in such as renewable energy, reforestation and community projects, rather than simply identifying businesses they would not invest in.

No precedents

Damien explains how a diverse background led him to the world of investment. “I spent six and a half years studying to be a priest… I studied economic history and English literature at uni… I drifted for many years… worked at Kings Cross as a night porter… taught for a couple years… was a bus driver. I became interested in share trading and by 1979 I was living off it full time… living off gambling, basically. That gave me the freedom to go traveling and to come across Bill Mollison. Then, my life totally changed and purpose entered it in a big way”.

This sense of purpose was to prove crucial to pursuing the development of ethical investments. When I ask Damien about how he got around the obstacles of the 50-investor limit and of setting up a management company, I am made aware of another of his traits – persistence – a trait motivated by his sense of purpose.

Persistence was needed to overcome the resistance of state Liberal and Labor governments to the setting up of small investment organisations. Finally, they obtained a security dealers licence and a prospectus. “It was a bit of a phyrric success because by the time we had the authority to go ahead and raise money, we were headed into a recession. The prospectus was launched on the day of the mini-crash in 1989″.

Today’s restraints

Getting the dealer’s licence might have been the biggest restraint on starting the industry, but what about the restraints which exist today?

“The main restraint is the perception that ethical investment is a pseudo-charity”, he replies. “The perception is that you can’t make money out of doing good. This is not true. A further restraint is that it is new. A lot of people, even Greens, would rather go with the big institutions. Yet another restraining force is people having too high expectations, expecting that the funds should be perfect”.

Leaning forward, Damien’s expression takes on an intensity as he speaks about his passion of making money by doing good, of helping small projects in need of start-up capital and of turning capitalism into a force which could empower communities and small business rather than hinder them.

Our discussion turns to the future. If rates of investment reflect the relative affluence of investors, then the findings of social researcher Hugh Mackay might not be promising. According to Mackay’s research, society as a whole is becoming poorer. The real value of incomes is falling as a sense of insecurity and fear of the future increase. The Australian middle class, Mackay claims, has split. A small number have become significantly more affluent while the larger portion has experienced declining financial wellbeing. I put it to Damien that although ethical investment has grown since 1981, the social scanario outlined by Hugh Mackay might influence investment in the future.

“Ethical investment is growing”, Damien emphasises. “However, there has been a slow down over the last six months. Australian Ethical Investments has had a slow year, it’s only brought in about five million dollars. The average growth within that fund, and August Investments before it, was about 30 percent per annum, a growth rate of around one-third a year, but that’s now increasing. More people are finding out about ethical investment and there’s the push for superannuation which Australian Ethical is catering to.”

So, who puts their money into ethical investments? Damien explains that the suspicion of money common to environmentalists has declined. So, is it the small, less-affluent investor that is providing the bulk of support to the industry?

Damien sat back and considers the question. “My observation is that poorer people want to put their money into this and they will usually scrape together the minimum of a couple of thousand dollars. Wealthy people tend to see it as a good cause and put the same amount in. I’ve heard that this is beginning to change and that wealthy people are starting to put in larger amounts,” replies Damien.

Investing in trees

History discussed, we turn to Damien’s immediate project, August Ecoforests, an innovative initiative in ecologically sustainable forestry.

Over a quarter of the needed funds have so far been raised and the search for land is on. When land is secured, a design team will be brought together.

“The minimum investment is $10,000. We’ve done analysis on the difference between long term cabinet timber and short term woodchip timber. We’re projecting that the prices of the longer-growing timbers will increase more dramatically than the short term rotations. That has actually happened in the last three to four years.

I left that interview with Damien feeling optimistic about the future of ethical investment in Australia. Had, at last, the time come for a positive and future-oriented industry that would overcome the negative view of money held by progressive-thinking people. Perhaas, at last, money would come to be seen as an enabling thing rather than merely being associated with greed,

Update – 2005

August Ecoforest became EcoForest Pty Ltd and found land in the Upper Hunter Valley. This was planted to mixed hardwoods, including Eucalypts. Roads and water storages were constructed and visitor cabins planned. For a time I worked for the company developing its communications.

All went well for a few years, then the level of investment fell away and current costs ate into the budget.

The fate of EcoForest raises serious questions about the willingness of Green and others with an environmental point of view (EcoForest was not aimed only at this group) to invest in the things they presumably believe in.
In 2005, EcoForest Pty Ltd was forced into receivership because of insufficient investment.