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In the business of ‘investing for generations’



We will respond to the threat of climate change, knowing that the failure to do so would betray our children and future generations.” This sentence, from Barack Obama’s second inauguration speech in January, was a welcome – if a little overdue – call to arms in the fight against mankind’s greatest challenge.

Around the time Obama was giving his rousing address to a captive audience in Washington, I’s were being dotted and T’s crossed in an office over 3,000 miles away in London, on a deal that would see a popular range of sustainable investment funds transfer from one investment house to another.

You might wonder what these two seemingly independent events have to do with each other. With climate change, sustainability and resource efficiency cropping up ever-more often in political speeches – though perhaps sadly not enough in policy decisions – there’s a noticeable shift happening among individuals, and more importantly, investors.

If there’s one thing that’s happened in the last decade, it’s that individuals want to live their lives according to their values”, says Peter Michaelis, head of sustainable and responsible investment (SRI) at Alliance Trust Investments.

Michaelis, his team, and the six funds in the Sustainable Futures range they manage, relocated a short distance across London at the beginning of the year, after Aviva Investors – which previously ran the funds – decided to close its SRI arm in early 2012.

Transferring to an investment house that celebrates its 125th anniversary this year, and whose strapline is “investing for generations”, the £1.4 billion fund range has found a home that so far has been a very good match culturally.

And the positive early relationship has been aided, Michaelis says, by strong demand from investors at a time when consumer action and calls for transparency are very much on the agenda: Individuals want to shop where they want to shop; they want to know where their products are sourced from; they want to join the NGOs; and they want to vote for the government that’s most likely to meet those values. And the one bit that’s always been missing has been the realisation that they can invest according to their values as well.

There’s a great appetite for people to invest their money in companies that are providing solutions to make the world a better place

If we say to an investor that we can take a portion of their investments and put them in companies that are finding solutions to climate change, that sits very well with them.

There’s a great appetite for people to invest their money in companies that are providing solutions to make the world a better place – particularly if we can continue to show that you get stronger returns than the benchmark from that.”

Michaelis adds that as well as looking for these solutions, the global financial crisis that began in 2007 has made people realise just how much impact their money can have. He describes the cause of the crisis as “a total failure of governance”. Few could or would argue with him.

“To every action, there is always an equal and opposite reaction”

While this stark realisation among consumers has been brought to light in the form of negative implications on society, the environment and the economy, Newton’s third law of motion tells us that similar effects can also be reaped on the positive side.

Using that mantra, the core tenet of the Sustainable Futures Funds revolves around sustainable development. They focus on four key themes: climate change and energy efficiency; sustainable consumption; quality of life; and good governance and risk management. While the non-SRI teams at Alliance Trust also look at stocks through an environmental, social and governance (ESG) lens in some cases, it’s not their primary focus.

Following Aviva’s “strategic problems” that led it to its decision to close down its SRI arm last year, Michaelis was tasked with finding a new home for his team and their growing funds.

It’s never nice to be told you are no longer wanted somewhere, but after having a bit of time to reflect on the decision, it actually is very appropriate that we are at much more specialist asset manager”, he says.

SRI is a specialist asset class, and it’s one that needs specialist marketing and specialist fund management focus.

If we’re talking food retail, my analogy is that Aviva Investors is Tesco; Alliance Trust is more of a delicatessen.”

Michaelis admits that his funds drew a lot of attention from a number of investment houses that varied in size in terms of assets under management. He admits that the interest was flattering, and that it gave the Sustainable Futures team “confidence that it wasn’t just [them] that saw the growth potential in SRI”.

Very soon, though, Alliance Trust emerged as the preferred candidate, and Michaelis pins their decision down to three reasons.

Culture, continuity, commitment

Firstly, the group’s culture: as well as its long history and its pledge to “invest for generations”, it is a signatory of the UN-backed Principles for Responsible Investment (PRI) and the UK Stewardship Code. On top of this, Michaelis had a good working relationship with its CEO, Katherine Garrett-Cox, who was chief investment officer at Morley when Aviva Investors were founder signatories of the PRI.

The second element was continuity. A big concern for Michaelis and his team was that the management of the fund would be interrupted as operations were transferred between Aviva and Alliance Trust. This turned out to be not relevant, though, with Alliance’s existing infrastructure already more-than-capable to deal with their new acquisitions.

And then, the final element was Alliance’s commitment.

Michaelis says, “We wanted to go somewhere where we were one of a few offerings; where the success or failure of the company was largely dependent on the success or failure of SRI.

We didn’t want to go somewhere where they were just taking SRI as an option to look at for a couple of years; we wanted to go somewhere where it was very, very important to that company’s success.

With these three boxes well and truly checked, it became very clear very soon that the Sustainable Futures Funds would be best fitted with Alliance Trust.

Just a few months into his tenure as head of SRI at his new place of work, Michaelis reflects on the past 12 months in the industry – a period of time, he says, that has been dominated by one key issue: climate change.

Some people remark that in the presidential debates, climate change didn’t feature at all, which I guess we were a bit surprised about, but it did feature very strongly in Obama’s inauguration speech, and also China’s new five-year plan talks about carbon and energy efficiency quite strongly”, he explains.

In the meantime, the science has got ever stronger, with the publication of another Intergovernmental Panel on Climate Change (IPCC) report this year, which by all accounts will strengthen the link between manmade emissions and climate change.

Hurricane Sandy will also have made people sit up and think about what life will be like under a malign climate.”

Climate change rhetoric in recent months, from high-profile figures such as Obama, has helped fuel public debate, and more importantly, allow people to make the connection between their money and some of the most urgent sustainability challenges.

As Vinod Khosla, the Indian-born American entrepreneur and venture capitalist, put it so eloquently, “No one will pay you to solve a non-problem […] The bigger the problem, the bigger the opportunity.”

We face some huge challenges in areas such as energy, healthcare, education, human rights and resource shortages. And not forgetting climate change, which is the overarching problem that negatively affects each of the others.

But by investing positively in each of these areas – which is the aim of the Alliance Trust Sustainable Futures Funds – we will not only come out the other side with a more prosperous economy, but also with a more sustainable society and a cleaner environment.

Read Blue & Green Tomorrow’s Guide to Sustainable Investment for further information into sustainable investment. Meanwhile, The Guide to Ethical Financial Advice 2013 will help you find a specialist ethical IFA near you, and The Guide to Ethical Funds 2013 will help you decide which of the UK’s green and ethical funds to go for.

Further reading:

Alliance Trust surges on in SRI after completing Aviva transfer

Obama: climate change inaction would ‘betray future generations’

Climate sceptics are our generation’s slavery apologists

Climate change will create investment winners and losers

The Guide to Sustainable Investment 2013


How Going Green Can Save A Company Money



going green can save company money
Shutterstock Licensed Photot - By GOLFX

What is going green?

Going green means to live life in a way that is environmentally friendly for an entire population. It is the conservation of energy, water, and air. Going green means using products and resources that will not contaminate or pollute the air. It means being educated and well informed about the surroundings, and how to best protect them. It means recycling products that may not be biodegradable. Companies, as well as people, that adhere to going green can help to ensure a safer life for humanity.

The first step in going green

There are actually no step by step instructions for going green. The only requirement needed is making the decision to become environmentally conscious. It takes a caring attitude, and a willingness to make the change. It has been found that companies have improved their profit margins by going green. They have saved money on many of the frivolous things they they thought were a necessity. Besides saving money, companies are operating more efficiently than before going green. Companies have become aware of their ecological responsibility by pursuing the knowledge needed to make decisions that would change lifestyles and help sustain the earth’s natural resources for present and future generations.

Making needed changes within the company

After making the decision to go green, there are several things that can be changed in the workplace. A good place to start would be conserving energy used by electrical appliances. First, turning off the computer will save over the long run. Just letting it sleep still uses energy overnight. Turn off all other appliances like coffee maker, or anything that plugs in. Pull the socket from the outlet to stop unnecessary energy loss. Appliances continue to use electricity although they are switched off, and not unplugged. Get in the habit of turning off the lights whenever you leave a room. Change to fluorescent light bulbs, and lighting throughout the building. Have any leaks sealed on the premises to avoid the escape of heat or air.

Reducing the common paper waste

paper waste

Shutterstock Licensed Photo – By Yury Zap

Modern technologies and state of the art equipment, and tools have almost eliminated the use of paper in the office. Instead of sending out newsletters, brochures, written memos and reminders, you can now do all of these and more by technology while saving on the use of paper. Send out digital documents and emails to communicate with staff and other employees. By using this virtual bookkeeping technique, you will save a bundle on paper. When it is necessary to use paper for printing purposes or other services, choose the already recycled paper. It is smartly labeled and easy to find in any office supply store. It is called the Post Consumer Waste paper, or PCW paper. This will show that your company is dedicated to the preservation of natural resources. By using PCW paper, everyone helps to save the trees which provides and emits many important nutrients into the atmosphere.

Make money by spreading the word

Companies realize that consumers like to buy, or invest in whatever the latest trend may be. They also cater to companies that are doing great things for the quality of life of all people. People want to know that the companies that they cater to are doing their part for the environment and ecology. By going green, you can tell consumers of your experiences with helping them and communities be eco-friendly. This is a sound public relations technique to bring revenue to your brand. Boost the impact that your company makes on the environment. Go green, save and make money while essentially preserving what is normally taken for granted. The benefits of having a green company are enormous for consumers as well as the companies that engage in the process.

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5 Easy Things You Can Do to Make Your Home More Sustainable




sustainable homes
Shutterstock Licensed Photot - By Diyana Dimitrova

Increasing your home’s energy efficiency is one of the smartest moves you can make as a homeowner. It will lower your bills, increase the resale value of your property, and help minimize our planet’s fast-approaching climate crisis. While major home retrofits can seem daunting, there are plenty of quick and cost-effective ways to start reducing your carbon footprint today. Here are five easy projects to make your home more sustainable.

1. Weather stripping

If you’re looking to make your home more energy efficient, an energy audit is a highly recommended first step. This will reveal where your home is lacking in regards to sustainability suggests the best plan of attack.

Some form of weather stripping is nearly always advised because it is so easy and inexpensive yet can yield such transformative results. The audit will provide information about air leaks which you can couple with your own knowledge of your home’s ventilation needs to develop a strategic plan.

Make sure you choose the appropriate type of weather stripping for each location in your home. Areas that receive a lot of wear and tear, like popular doorways, are best served by slightly more expensive vinyl or metal options. Immobile cracks or infrequently opened windows can be treated with inexpensive foams or caulking. Depending on the age and quality of your home, the resulting energy savings can be as much as 20 percent.

2. Programmable thermostats

Programmable thermostats

Shutterstock Licensed Photo – By Olivier Le Moal

Programmable thermostats have tremendous potential to save money and minimize unnecessary energy usage. About 45 percent of a home’s energy is earmarked for heating and cooling needs with a large fraction of that wasted on unoccupied spaces. Programmable thermostats can automatically lower the heat overnight or shut off the air conditioning when you go to work.

Every degree Fahrenheit you lower the thermostat equates to 1 percent less energy use, which amounts to considerable savings over the course of a year. When used correctly, programmable thermostats reduce heating and cooling bills by 10 to 30 percent. Of course, the same result can be achieved by manually adjusting your thermostats to coincide with your activities, just make sure you remember to do it!

3. Low-flow water hardware

With the current focus on carbon emissions and climate change, we typically equate environmental stability to lower energy use, but fresh water shortage is an equal threat. Installing low-flow hardware for toilets and showers, particularly in drought prone areas, is an inexpensive and easy way to cut water consumption by 50 percent and save as much as $145 per year.

Older toilets use up to 6 gallons of water per flush, the equivalent of an astounding 20.1 gallons per person each day. This makes them the biggest consumer of indoor water. New low-flow toilets are standardized at 1.6 gallons per flush and can save more than 20,000 gallons a year in a 4-member household.

Similarly, low-flow shower heads can decrease water consumption by 40 percent or more while also lowering water heating bills and reducing CO2 emissions. Unlike early versions, new low-flow models are equipped with excellent pressure technology so your shower will be no less satisfying.

4. Energy efficient light bulbs

An average household dedicates about 5 percent of its energy use to lighting, but this value is dropping thanks to new lighting technology. Incandescent bulbs are quickly becoming a thing of the past. These inefficient light sources give off 90 percent of their energy as heat which is not only impractical from a lighting standpoint, but also raises energy bills even further during hot weather.

New LED and compact fluorescent options are far more efficient and longer lasting. Though the upfront costs are higher, the long term environmental and financial benefits are well worth it. Energy efficient light bulbs use as much as 80 percent less energy than traditional incandescent and last 3 to 25 times longer producing savings of about $6 per year per bulb.

5. Installing solar panels

Adding solar panels may not be the easiest, or least expensive, sustainability upgrade for your home, but it will certainly have the greatest impact on both your energy bills and your environmental footprint. Installing solar panels can run about $15,000 – $20,000 upfront, though a number of government incentives are bringing these numbers down. Alternatively, panels can also be leased for a much lower initial investment.

Once operational, a solar system saves about $600 per year over the course of its 25 to 30-year lifespan, and this figure will grow as energy prices rise. Solar installations require little to no maintenance and increase the value of your home.

From an environmental standpoint, the average five-kilowatt residential system can reduce household CO2 emissions by 15,000 pounds every year. Using your solar system to power an electric vehicle is the ultimate sustainable solution serving to reduce total CO2 emissions by as much as 70%!

These days, being environmentally responsible is the hallmark of a good global citizen and it need not require major sacrifices in regards to your lifestyle or your wallet. In fact, increasing your home’s sustainability is apt to make your residence more livable and save you money in the long run. The five projects listed here are just a few of the easy ways to reduce both your environmental footprint and your energy bills. So, give one or more of them a try; with a small budget and a little know-how, there is no reason you can’t start today.

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