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October 07, 2002
Hong Kong Investment Firm Launches New Asian SRI Fund
    by William Baue

The Kingsway SRI Asia Fund will apply both negative and positive screens to investments throughout the non-Japanese Asian markets.


Today, Kingsway Fund Management is launching the Kingsway SRI Asia Fund, the first Hong Kong-based socially responsible investment (SRI) fund that combines positive and negative screens. Over the next two months, the new fund will apply its "SRI Values Added" process, overlaying positive SRI screens on the negative screens the firm already employs on all of its public funds. During this time period, the new fund will also expand its geographic coverage to invest in companies throughout the non-Japanese Asian equity markets.

"The Kingsway SRI Asia Fund is a great step forward for SRI in Hong Kong," said Tessa Tennant, executive chair of the Association for Sustainable and Responsible Investment in Asia (ASrIA). Kingsway was the only Asian institution to be a founding sponsor of AsrIA. "It gives overseas investors a long-overdue opportunity to invest in a sustainability fund invested and managed in the region. It shows Kingsway's leadership in this field once again."

In 2000, Kingsway made the commitment to employ negative SRI screens to all of its 11 funds and unit trusts. These "SRI Values Screens" exclude from the investment universe companies involved in the military, nuclear power, tobacco, or gambling industries. The screens also exclude companies that employ deforestation practices or use animal testing in research for nonmedical products. Kingsway also offered positive screening in 2000 but only to clients who specifically requested a more active SRI approach.

The Kingsway SRI Asia Fund will apply both negative and positive screens, as a matter of course, using a set of 23 different social and environmental criteria. Kingsway's investment team commences the SRI Values Added research process by administering a questionnaire to each company considered for investment. The firm then visits each company. Kingsway assesses the company's performance in the areas of corporate governance, public accountability, community development, human rights, environmental management, product impact, and process improvements. The team awards companies bonus points for positive practices and gives demerits for negative practices. For example, the product impact category considers positive or negative environmental repercussions.

"Companies that have improved resource consumption or utilize renewable energy will receive bonuses," Kingsway's SRI Values Added policy states. "Companies that produce goods that harm the environment or wildlife will be penalized."

Kingsway operates from the assumption that practicing corporate responsibility is more cost-effective than risking the liabilities of irresponsible corporate behavior. Rather than considering sustainable business practices a threat, as some firms see them, Kingway sees these practices as an opportunity. The Asian markets represent a unique opportunity for socially responsible investing because the economies are still developing. Whereas more developed markets must transform existing practices in order to achieve sustainability, developing markets can implement sustainable practices from the get-go.

The Kingsway SRI Asia Fund, which will be available to both retail and institutional investors, seeks to take advantage of this opportunity.

 

 
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