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Economics versus ethics: the story of modern sustainable investment

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Sustainable investment, ethical investment, socially responsible investment – call it what you will; it is what the veteran investment guru Matthew Kiernan calls “investing as if the future mattered” and it has come a long way since its religious origins of ensuring that the investments made by churches did not clash with their beliefs.

By Mike Scott.

The ethical investing approach, which begins with the premise that stocks in certain sectors—notably the ‘sin’ sectors of alcohol, pornography, tobacco, gambling and armaments—should be excluded from portfolios, still has a role to play but it is likely that it will only ever be a small sector of the market.

The fact that many stocks are excluded by these funds, in a process known as negative screening, led many in the business to assume that they offered lower returns to investors and that they were inconsistent with the fiduciary duty of pension funds to produce the maximum return for investors. A number of studies have questioned that assumption, most notably a seminal 2005 report by law firm Freshfields for the United Nations Environment Programme Finance Initiative (UNEP-FI) but it is still a point of view that is widely held in the City.

At the same time, the environmental, social and governance (ESG) issues that underpin responsible investment—including climate change, environmental stewardship, labour rights, resource availability, executive pay and bribery and corruption—have become increasingly mainstream. When I first started writing about this subject in 2006, these factors were labelled non-financial issues and many analysts did not consider them material to the performance of companies.

Six years later, following one of the warmest winters on record, the UK is having to deal with droughts and floods simultaneously in just one of the many global signs that climate change is starting to affect weather patterns. In the wake of the US sub-prime debacle that triggered the global financial crisis, BP’s Gulf of Mexico disaster, the current turmoil at News International, the controversy over conditions at Apple supplier Foxconn and the numerous recent revolts by investors over executive pay levels (to name but a few examples), few people would say that ESG issues do not matter.

And alongside the growing acknowledgement of the importance of ESG, new styles of investing have emerged to take it fully into account. Firstly, investors have cottoned on to the fact that there are real opportunities out there in sectors such as renewable energy, water, agriculture, health and education, where a growing number of  companies have identified many of the key sustainability issues and are providing solutions to them. Many of these are small emerging companies with little profile or track record, but they also include some of the world’s biggest and most successful corporations, such as Unilever, Siemens, GE, Phillips and Nissan, who have all staked their future on a more sustainable approach to business.

Another investment option is to take a best-in-class approach, identifying the companies that are better able to dealing with ESG issues. Judging which businesses are the top performers has become increasingly more simple as initiatives, such as the Carbon Disclosure Project (CDP), have achieved a critical mass of data that allows investors to compare companies’ performance on the greenhouse gases they emit or how much water they use. The top performers in the CDP’s Disclosure and Leadership indices are corporate giants such as Tesco, Bank of America, BMW, SAP and Sony.

A sure sign that investors are starting to take these issues more seriously is the recent rash of takeovers by the major business data providers such as Reuters, Bloomberg and MSCI of specialist ESG research houses such as Point Carbon, New Energy Finance and Matthew Kiernan’s Innovest Strategic Advisors. At Bloomberg, head of sustainability Curtis Ravenel says that about 6,000 companies provide some form of data on ESG issues, compared with 500-600 in 2005. “And if you are measuring a problem, you are probably managing it to some degree”, he told the Financial Times earlier this year.

The CDP has been vocal on about the implementation of carbon reduction policies and shareholder returns: “Companies in the 2011 Carbon Disclosure Leadership Index (CDLI) and Carbon Performance Leadership Index (CPLI) provide approximately double the average total return of the Global 500 between January 2005 and May 2011. This suggests a strong correlation between higher financial performance and good climate change disclosure and performance.

Low carbon growth is now widely accepted as fundamental to generating long-term shareholder value, avoiding dangerous climate change and helping the global economy recover from recent turmoil”.

There will always be a place for the ethical investing as practised by many church-based funds, charities and public service pension funds; it continues to offer a strategy that links money and morality. But, increasingly, sustainable investment is about good value rather than values.

Further reading:

The Guide to Sustainable Investment

Gucci and Puma group releases sustainability plan

EIRIS launches system to measure sustainability performance

Mike Scott is a freelance writer specialising in environment and business issues for the press and corporate clients. His work has been published in the Financial Times, the Times, the Guardian and the Daily Telegraph as well as in business publications ranging from Bloomberg New Energy Finance to Forbes.

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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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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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