Why would my money make any difference? – by Robin Currie
Well, it’s a good question. Why would it? Because normal investments, savings, pension funds and things like that are invested in mainstream companies. And if you’re a mainstream person, you will assume that you will make money through these jolly nice people - as long as you don’t look at them in detail.
But if you genuinely want to make a difference you need to know about the alternatives. And the difference between the two options of ‘ethical investment’ and ‘green investment’.
Generally, ‘ethical’ holdings have both positive and negative criteria while ‘green’ ones only support environmental organisations.
To give an example, the longest standing ethical investment fund in the UK is the Friends Provident Stewardship fund. This has fundamental exclusions and won’t invest in companies who deal with tobacco, gambling, pornography, armaments, exploitation of animals, human rights abuse and a variety of other issues. They also specifically look to invest in companies which make positive contribution to society and the environment.
Which is fine, but this doesn’t really change society in itself. However, Stewardship is one of the funds which also does something called ‘constructive engagement’. This means that, if you’re looking to support a company to improve how it operates in society and in the world, they need to know that they’re being kept under review. And constructive engagement means that the ethical fund will seriously interact with all the companies in which they invest. This is designed to support and encourage organisations to move towards more socially responsible and sustainable business practices including environmental management and labour standards. It doesn’t necessarily exclude companies because they have a poor record in the past but will seriously support them if they have made an actual commitment to change.
There are also a number of serious ‘green’ funds, most of which don’t bother with exclusions as they’re not interested in what companies don’t do, but only what they do. And these particularly invest in areas such as sustainable and renewable energy, organic farming, water treatment and pollution control.
All of which sounds fine, but will it make money?
Well, the old response to ethical investments were that they were a guilt-free way of losing money. But interestingly, the sector averages have done rather nicely in the last few years, environmental funds having grown at 26.2% in the last five years whereas UK Companies have only gone up by 14.4%. And there are a number of higher-risk global sustainability funds which have done even better, one of which has grown at 46.5% in the last three years against a sector average of 22.4%1
What else would like to know? Well, you might like to consider some funds? In which case I’d suggest that you should think about the following:
The IM WHEB Sustainability Fund was launched in June 2009 and invests in a variety of environmentally-sensitive holdings including companies providing solutions to climate change by offering alternative energy and energy efficient solutions. In addition, changing weather patterns mean that portable water is increasingly scarce in many parts of the world and the fund invests in companies who deal with this through metering, purification, conservation and supply. They also support an ageing global population through healthcare products and services.
1 All figures within this report are from Financial Express Prestel, August 2010, sell to sell. Volatility is expressed as standard deviation of monthly total returns over the last 36 months
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