Green Horizons
You will very likely have noticed the increased importance placed on ethical and environmental issues by businesses, politicians and world leaders, over the last two years in particular. It seems that being ‘green‘ has finally hit the mainstream, with everyone keen to stress their environmental credentials. How often would you have heard the term ‘carbon footprint‘ two to three years ago? It‘s also apparent that the interest in such issues has firmly established itself in the investment world.
According to the Investment Management Association (IMA), who record data on investment funds, net retail sales of ethical funds doubled in Quarter 1 of 2007, compared to Quarter 4 of 2006, and are three times higher than the same time last year.
When ethical funds were first launched during the 1980s they were termed ‘brazil‘ funds by some; the joke being that ethical investment was for nuts, on account of their poor performance. Indeed it‘s probably fair to say that this view persisted with some commentators for some time. Arguably it has only been this year that commentators have started to note strong performance from ethical funds (we covered this in one of our March editions of Minerva, in relation to the strong performance of the F&C Stewardship Income Fund).
Ethical funds, however, are far from alike and indeed are not all labelled alike. Some funds will put more of an emphasis on the ‘social responsibility‘ of companies, while other funds may focus more on ‘environmental sustainability‘ issues. Finding the fund that matches your own ethical bent can be difficult. For example, many oil and gas company stocks can and are held within ethical funds, on account of the fact that they spend money on researching alternative sources of energy; yet you may feel that the current environmental impact these companies have negates any green credentials they might possess.
When selecting an ethical fund, understanding the criteria it uses for selecting its stocks is just as important as with a non-ethical fund; and relating this to your own ethical criteria is as important as relating the funds objectives and risk profile to your own.
An example of two ‘dark green‘ ethical funds – or funds that have strict ethical criteria – are the Insight Evergreen Fund and Jupiter Ecology Fund. Both funds are well established, having been around for well over a decade, so cannot be accused of cashing in on the current wave of interest in ethical funds.
The Insight Evergreen Fund has a global investment remit and ethical criteria that relates to tobacco, gambling, military, human rights, animal welfare and the environment. Having launched in 1990 the fund currently has a bias towards companies involved in alternative energies. The fund considers issues concerning the environment and social responsibility.
The Jupiter Ecology Fund was launched in 1988 and focuses on companies which demonstrate a ‘positive commitment to long-term protection of the environment‘ – again the fund has a global investment remit. The Ecology fund is one of a stable of ethical funds managed by Jupiter.
Both of these funds have historically appealed to investors with clear ethical investment criteria; however, for individuals of a less environmentally conscious persuasion, the investment into ‘green‘ companies is no longer the preserve of ethical funds. Neil Woodford, for example, the manager of INVESCO PERPETUAL‘s equity income funds has been buying stocks in climate change related companies; and many other funds are beginning to dip their toe into the ethical pool.
[The views expressed in this article are those of the author and do not necessarily reflect the view or views of Chartwell Private Client Ltd, its subsidiaries or associates]
[Source: Daily Telegraph, thisismoney.co.uk, BBC Online, Insight, Jupiter, INVESCO PERPETUAL]
