How Ethical is Ethical Investing?
As tempting as it has been to quibble about being confined to one’s home during lockdown, we mustn’t overlook how fortunate we are to have this safe haven. It may have felt claustrophobic at times, but imagine not having this shelter while the world sunk into frighteningly unfamiliar territory. Yet there are an estimated 320,000 homeless people in the UK, according to charity Shelter. That’s 1 in every201 Brits who are unable to take refuge from a life-threatening virus in comfortable, familiar and consistent surroundings.
It is therefore encouraging to read This is Money’s article on Home REIT, a real estate investment trust that is planning to let accommodation on 20-30 year leases to charities, housing associations and other regulated organisations that receive housing benefit from the local or central government to provide accommodation for the homeless.
Set to float on the London Stock Exchange this month, HomeREIT is hoping to raise £250 million, while aiming to provide a return of 7.5%per annum to investors over the medium term. As well as providing accommodation, the project is committed to offering training and rehabilitation in an effort to help reintegrate residents into society.
The opportunity is being cited as especially appealing to ethical investors; however, some experts, such as Adrian Lowcock, Chartered Wealth Manager and Head of Personal Investing at Willis Owen, recommend that potential investors “make sure the investment stacks up on its own merits,”while acknowledging that the source of the rents and the length of the lease offer some reliability and predictability.
Lowcock suggests investors “watch the float and wait for the share price to settle before investing.” Dzmitry Lipski, Head of Funds Research at Interactive Investor, takes a similar stance – one of optimistic caution, as he claims Interactive Investor“will be watching the potential launch with interest,” although Home REIT would need to be screened and build a track record for them to consider investment.
Meanwhile, Brian Dennehy, boss of FundExpert.co.uk, raises the uncomfortable point that his “immediate instinct was that investors are being asked to make profits from the homeless,” before again citing a track record as being the only trustworthy indicator of whether this presents a viable investment opportunity. His Concern can be seen as something of an ethical dilemma as to whether something is exploitative if it ultimately benefits everyone involved. While investments aren’t being made purely on goodwill, it may be favourable to investing in luxury real estate that offers no semblance of a solution to homelessness.
While the pleas for caution from experts are understandable,and the concept of profiting from homelessness, even if the homeless are the intended beneficiary, is an ethical grey area, there certainly seems to be nobility in Home REIT’s intentions.