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A more reasonable face of ethical investment reporting

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Judging by our traffic on the day, lots of people were interested in a spat between Blue & Green Tomorrow and the Investors Chronicle during National Ethical Investment Week. In an informed and balanced contribution to the debate, IC has put forward the thoughts of its resident economist, Chris Dillow.

In a piece entitled Headwinds and tailwinds for ethical investors, Chris Dillow uses an aeronautical analogy to set out the challenges for ethical investors. Taking a more balanced approach than the article that got us hot under the collar, Dillow paints a picture of headwinds that hold the ethical sector back and tailwinds that speed it on its way.

The headwinds, those holding the sector back, he describes are the ‘good’ performance of tobacco (5m deaths per year, growing to 8m by 2030) and alcohol (2.5m deaths per year, plus millions of lives blighted). Citing our mutual friend, Adam Smith, he explores the compensating advantages of different stocks. ‘Doing good’, as patronising as that sounds, may reduce your yield but it also reduces the number of deaths you’re investing in too.

The final headwind is the positive screening in of higher risk, ‘fashionable’ green technology stocks. These aren’t necessarily going to be the go-to choice of a cautious investor due to failure rate of innovative ventures.

One of the tailwinds is what economist John Kay calls obliquity: “the fact that we can often achieve one objective by focusing upon something else”. By focusing on making great products, businesses do well. By focusing on something other than profit, such as reducing the pollution and waste endemic in manufacturing and distribution, costs fall and profits can rise, or a business can become more competitive. Dillow perfectly illustrates the opposite perspective with the short-termism of profit-maximising banks and the harm that has done to the sector, economy and society.

Another tailwind is the fact that talking the sector down has probably suppressed prices meaning the canny investor can acquire stocks cheap.

The three headwinds outnumber the two tailwinds but miss the critical one that ethical investors are not screwing over the planet and its people for a percentage.

Dillow goes on to say, “During the past 10 years the FTSE4Good UK index has underperformed the All-Share index over the last 10 years, rising by 36.8% compared with 56.7%. And in the past five years, many UK ethical funds have under-performed the average all companies fund.”

Whether the FTSE4Good UK Index is the best comparator here is questionable but at least we’re comparing Granny Smiths with Golden Delicious. Investing ethically (responsibly, sustainably, thematically or impact-first) is certainly a more complicated and involved style of investment that requires research or expert advice on specific fund make-up and performance over aggregate indices.

Mark Hoskin, over at the rather excellent Worldwise Investor, points out that UK Ethical Funds [have] outperform[ed] since Lehman’s collapse.

The final part of Dillow’s tailwind analogy is that investment strategies wax and wane in a phenomenon called evolutionary finance, just as in evolutionary biology.

“Imagine a new source of profits is spotted – say, that ethical stocks are cheap. The strategy ‘buy ethical companies’ then multiplies, as animals do if they find a new food source. This spread of the strategy bids up share prices, to levels from which subsequent profits are low or negative – just as the increase of a species depletes the food source. This causes some of the strategies – some members of the species – to die out. But as they shrink in number, so the food/profit source replenishes itself. And the cycle can then begin again.”

Despite all this fairness, Dillow has firm doubts that the tailwinds are with ethical investors, pointing out that many funds managers are similarly sceptical. As we know from the recent history of stock markets, fund managers as a group really know what they’re doing.

Nevertheless, it’s a more useful and superior contribution to the debate.

He ends his piece with a personal final thought: “I’m sympathetic to this rejection of conventional wisdom. But let’s be clear. To be an ethical investor requires you to hold some out-of-consensus attitudes.”

Out-of-consensus attitudes are what “push the human race forward”

After our “consternation” with Dillow’s colleague, we pointed out in the subsequent Twitter spat that unless investors held “out-of-consensus views”, we’d still have slavery. This was described as a “ridiculous” point, but in fact, many comparisons can be drawn up between the two.

Lest we forget, abolishing slavery was an out-of-consensus investment perspective at the time, simply because slavery was so hugely profitable. Returns on investment can be massive when your workforce is effectively free and has a tendency to reproduce itself. It’s also relatively low risk, because you can just kill them if they cause trouble. To prove that profitable point, the East India Company was actually exempted from the Slavery Abolition Act 1833.

In the 179 years since the Act, we have almost unanimously accepted that slavery is abhorrent. In another 179 years, promoting tobacco and alcohol in developing countries that have poor public health systems to cope with the outcomes and no public health education to discourage take up, will be seen as equally abhorrent. Especially when the death and misery that results is because we want to make an extra 1.5% a year on our investments (which is the annual difference between 36.8% and 56.7% over ten years) – and only then, if we invest in generic index-linked funds rather than pick funds carefully. Is a highly debatable extra 1.5% really worth 21,000 deaths a day and rising?

It’s very likely that in another 179 years, in 2191, future generations will look back at our consensus investment attitudes today (the cavalier use of fossil fuels, ruination of the environment and exploitation of developing countries, women and children) and conclude that we really were a morally bankrupt age. They’ll probably curse us for our complete stupidity, rather than conventional wisdom, and consensus short-sightedness.

Lest we also forget, it is only those who see the business or investment consensus as imperfect, who actually deliver the innovation and growth of the future.

As the great ‘out-of consensus’ thinker Steve Jobs said, and we can’t put  it better, “Here’s to the crazy ones, the misfits, the rebels, the troublemakers, the round pegs in the square holes… the ones who see things differently — they’re not fond of rules… You can quote them, disagree with them, glorify or vilify them, but the only thing you can’t do is ignore them because they change things… they push the human race forward, and while some may see them as the crazy ones, we see genius, because the ones who are crazy enough to think that they can change the world, are the ones who do.”

To put it bluntly, unreasonable, contrarian, out-of-consensus ethical investors are more enlightened, more engaged and more responsible global citizens. We prefer and applaud this out-of-consensus group over any other group of investors, advisers or funds.

The last word goes to George Bernard Shaw: “The reasonable man adapts himself to the world; the unreasonable one persists to adapt the world to himself. Therefore all progress depends on the unreasonable man.”

Further reading:

The Investors Chronicle’s masterclass in misleading ethical investment headlines

Ethical investors are not tree huggers, but air breathers (and responsible global citizens)

Witnessing financial capitalism’s failure

Simon Leadbetter is the founder and publisher of Blue & Green Tomorrow. He has held senior roles at Northcliffe, The Daily Telegraph, Santander, Barclaycard, AXA, Prudential and Fidelity. In 2004, he founded a marketing agency that worked amongst others with The Guardian, Vodafone, E.On and Liverpool Victoria. He sold this agency in 2006 and as Chief Marketing Officer for two VC-backed start-ups launched the online platform Cleantech Intelligence (which underpinned the The Guardian’s Cleantech 100) and StrategyEye Cleantech. Most recently, he was Marketing Director of Emap, the UK’s largest B2B publisher, and the founder of Blue & Green Communications Limited.

Features

Ways Green Preppers Are Trying to Protect their Privacy

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Environmental activists are not given the admiration that they deserve. A recent poll by Gallup found that a whopping 32% of Americans still doubt the existence of global warming. The government’s attitude is even worse.

Many global warming activists and green preppers have raised the alarm bell on climate change over the past few years. Government officials have taken notice and begun tracking their activity online. Even former National Guard officers have admitted that green preppers and climate activists are being targeted for terrorist watchlists.

Of course, the extent of their surveillance depends on the context of activism. People that make benign claims about climate change are unlikely to end up on a watchlist, although it is possible if they make allusions to their disdain of the government. However, even the most pacifistic and well intentioned environmental activists may unwittingly trigger some algorithm and be on the wrong side of a criminal investigation.

How could something like this happen? Here are some possibilities:

  • They could share a post on social media from a climate extremist group or another individual on the climate watchlist.
  • They could overly politicize their social media content, such as being highly critical of the president.
  • They could use figures of speech that may be misinterpreted as threats.
  • They might praise the goals of a climate change extremist organization that as previously resorted to violence, even if they don’t condone the actual means.

Preppers and environmental activists must do everything in their power to protect their privacy. Failing to do so could cost them their reputation, future career opportunities or even their freedom. Here are some ways that they are contacting themselves.

Living Off the Grid and Only Venturing to Civilization for Online Use

The more digital footprints you leave behind, the greater attention you draw. People that hold controversial views on environmentalism or doomsday prepping must minimize their digital paper trail.

Living off the grid is probably the best way to protect your privacy. You can make occasional trips to town to use the Wi-Fi and stock up on supplies.

Know the Surveillance Policies of Public Wi-Fi Providers

Using Wi-Fi away from your home can be a good way to protect your privacy.However, choosing the right public Wi-Fi providers is going to be very important.

Keep in mind that some corporate coffee shops such a Starbucks can store tapes for up to 60 days. Mom and pop businesses don’t have the technology nor the interest to store them that long. They generally store tips for only 24 hours and delete them afterwards. This gives you a good window of opportunity to post your thoughts on climate change without being detected.

Always use a VPN with a No Logging Policy

Using a VPN is one of the best ways to protect your online privacy. However, some of these providers do a much better job than others. What is a VPN and what should you look for when choosing one? Here are some things to look for when making a selection:

  • Make sure they are based in a country that has strict laws on protecting user privacy. VPNs that are based out of Switzerland, Panama for the British Virgin Islands are always good bets.
  • Look for VPN that has a strict no logging policy. Some VPNs will actually track the websites that you visit, which almost entirely defeats the purpose. Most obviously much better than this, but many also track Your connections and logging data. You want to use a VPN that doesn’t keep any logs at all.
  • Try to choose a VPN that has an Internet kill switch. This means that all content will stop serving if your VPN connection drops, which prevents your personal data from leaking out of the VPN tunnel.

You will be much safer if you use a high-quality VPN consistently, especially if you have controversial views on climate related issues or doomsday prepping.

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Features

How Going Green Can Save Your Business Thousands

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Running a company isn’t easy. From reporting wages in an efficient way to meeting deadlines and targets, there’s always something to think about – with green business ideas giving entrepreneurs something extra to ponder. While environmental issues may not be at the forefront of your mind right now, it could save your business thousands, so let’s delve deeper into this issue.

Small waste adds up over time

A computer left on overnight might not seem like the end of the world, right? Sure, it’s a rather minor issue compared to losing a client or being refused a loan – but small waste adds up over time. Conserving energy is an effective money saver, so to hold onto that hard-earned cash, try to:

  • Turn all electrical gadgets off at the socket rather than leaving them on standby as the latter can crank up your energy bill without you even realizing.
  • Switch all lights off when you exit a room and try switching to halogen incandescent light bulbs, compact fluorescent lamps or light emitting diodes as these can use up to 80 per cent less energy than traditional incandescent and are therefore more efficient.
  • Replace outdated appliances with their greener counterparts. Energy Star appliances have labels which help you to understand their energy requirements over time.
  • Draught-proof your premises as sealing up leaks could slash your energy bills by 30 per cent.

Going electronic has significant benefits

If you don’t want to be buried under a mountain of paperwork, why not opt for digital documents instead of printing everything out? Not only will this save a lot of money on paper and ink but it will also conserve energy and help protect the planet. You may even be entitled to one of the many tax breaks and grants issued to organizations committed to achieving their environmental goals. This is particularly good news for start-ups with limited funds as the Environment Protection Agency (EPA) is keen to support companies opening up their company in a green manner.

Of course, if you’re used to handing out brochures and leaflets at every company meeting or printing out newsletters whenever you get the chance, going electronic may be a challenge – but here are some things you can try:

  • Using PowerPoint presentations not printouts
  • Communicating via instant messenger apps or email
  • Using financial software to manage your books
  • Downloading accounting software to keep track of figures
  • Arranging digital feedback and review forms
  • Making the most of Google Docs

Going green can help you to make money too

Going green and environmental stability is big news at the moment with many companies doing their bit for the environment. While implementing eco-friendly strategies will certainly save you money, reducing your carbon footprint could also make you a few bucks too. How? Well, consumers care about what brands are doing more than ever before, with many deliberately siding with those who are implementing green policies. Essentially, doing your bit for the environment is a PR dream as it allows you to talk about what everyone wants to hear.

Going green can certainly save your money but it should also improve your reputation too and give you a platform to promote your business.

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