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Making the dream of ethical investment a reality

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Like many specialist ethical financial advisers, Scott Murray’s roots began in mainstream investment. He then realised he needed a change. Now managing director of Virtuo Wealth Management, he spoke about his commitment to ethical investment with Alex Blackburne.

On February 6, 1968, less than two months before he was assassinated, Martin Luther King Jr made a speech in Washington DC called A Proper Sense of Priorities. He ended with a tale about ethics.

On some positions, cowardice asks the question, “Is it safe?” Expediency asks the question, “Is it politic?” Vanity asks the question, “Is it popular?” But conscience asks the question, “Is it right?” And there comes a time when one must take a position that is neither safe, nor politic, nor popular but he must take it because conscience tells him it is right.”

For many, this quote would sum up perfectly the reasons for opting for ethical investment; ensuring your conscience is clear, your morals intact, and your investments in funds and companies that are doing some environmental or social good as opposed to bad.

But as the sector continues to experience exponential growth, being safe, politic and popular are all traits that can now be attributed to it without argument.

For Scott Murray, managing director of Edinburgh-based financial advisers Virtuo Wealth Management, though, doing the right thing ethically is at the forefront of his mind, and in turn, spearheads the advice he gives to clients. But it hasn’t always been that way.

After having experience with investments over the last 15 years, I felt that it was time for a change to be honest”, Murray explains, when asked about how he got into specialist ethical financial advice.

Don’t just accept an adviser or a bank manager’s recommendation. Challenge and ask questions about what type of funds they’re invested in, and learn about what types of fund there are

I decided that I wanted to become more involved in looking at socially responsible and ethical funds, and start to use my own views and thoughts to try and influence clients to invest in this area.”

Whereas faith and spirituality were fundamental to the teachings of Martin Luther King, an inspiration of Murray’s, he cites an increased awareness of the impact that investments can have as one of the main drivers behind his shift in morals.

He founded the business that eventually morphed into Virtuo in 2007, when, according to responsible investment research firm EIRIS, just over £8.8 billion was invested in green and ethical funds in the UK.

Fast-forward four years and by June 2011, this figure has increased by 27% to £11.3 billion, and Murray has witnessed this shift first-hand.

We all want to try and support local businesses now, whether it’s buying organic food or fair trade coffee or chocolate, providing it’s affordable to do the right thing, and I don’t see any difference with managing money”, he says.

The majority of clients I speak to are willing to look at ethical funds and are willing to commit a certain percentage to investing ethically.

It’s more than just giving people the choice; the ethical story does actually stack up.

The socially responsible investment (SRI) funds that are there can actually perform well, and they’re also looking after the planet or helping our countries in the same manner.”

Although the sector’s figures are encouraging on their own, when compared to the size of the mainstream investment industry, it becomes a tale of David v Goliath.

I think there’s just a lack of commitment [to ethical investment] from investment houses”, says Murray.

They maybe haven’t seen the large influx of money that they would like in other funds that have been launched.

Or maybe the boutique investment houses just don’t the budget to invest in this area – which can be shown by the Henderson team going to WHEB and the Aviva team going to the Alliance Trust.

I think it’s just a case of how much commitment a mainstream investment house has in this sector and whether a boutique investment house such as WHEB can commit to implementing a new fund.”

Indeed, mainstream investment houses are often accused of offering token ethical funds, some of which appear in listings alongside ones that might invest in oil companies or the arms trade. In this scenario, it’d be easy to question the firm’s commitment to ethical investment, but at the same time, the big houses have arguably the most influence across the market to effect a real change towards ethics.

Rather than the shock tactics of performance, we could be actually looking at what other funds are investing in and whether clients want to be involved with them

But being a burgeoning but fledgling sector, ethical investment is often at a detriment because there are simply not enough advisers who specialise in giving ethical-based advice.

Clients don’t have the same education with regards to what funds are available”, Murray points out.

Unfortunately, they’re getting influenced in areas that have been around 20-30 years. There’s not the same profile in ethical funds, and I think there’s a common misconception of profit dilution as well.

I don’t think there’s a compromise to be made. We’re on the planet for a certain amount of time and people should want to invest in funds that are actually going to be looking after the planet and doing the right thing.”

The misconception of profit dilution that Murray alluded to is quite simply not true anymore. Ethical, sustainable and responsible investments perform just as well (or given the current volatility of the entire stock market, just as badly) as conventional funds. This was shown most recently by an Osmosis Investment Management study, which concluded that investments in sustainable, resource-efficient companies would reap higher returns than the competition.

And this is just the latest in a long line of similar studies that clearly show the market outperformance of ethical stocks.

Another thing that Murray picks out is the media’s coverage of contentious investment strategies, such as the fact that the pension funds of a number of English councils were found to have been investing in the tobacco industry – despite many of them publicly promoting a ‘stop smoking’ campaign of some kind.

It’s that type of media coverage that we could do with more of”, says Murray.

Rather than the shock tactics of performance, we could be actually looking at what other funds are investing in and whether clients want to be involved with them.”

And it’s that on that note that Murray delivers his final thoughts about ethical investment, or rather a warning to investors to be bold when selecting their portfolios and to not just choose to toe the line.

The types of companies that are benefiting from a client’s money might not hit home.

I’d just urge people to really think about where they’re investing.

Don’t just accept an adviser or a bank manager’s recommendation. Challenge and ask questions about what type of funds they’re invested in, and learn about what types of fund there are.”

In Martin Luther King Jr’s most famous speech, he dreamt of equality, freedom and justice in the world. Ethical investors dream of true sustainability; something that can only be achieved if we all vote, consume and most importantly, invest, in ways that help the planet, its people and all of our prosperity.

Get in touch with Virtuo Wealth Management or fill in our online form to find out how your money can make a difference.

Previous interviewees include:

Editors Choice

2017 Was the Most Expensive Year Ever for U.S. Natural Disaster Damage

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Natural Disaster Damage
Shutterstock / By Droidworker | https://www.shutterstock.com/g/droidworker

Devastating natural disasters dominated last year’s headlines and made many wonder how the affected areas could ever recover. According to data from the U.S. National Oceanic and Atmospheric Administration (NOAA), the storms and other weather events that caused the destruction were extremely costly.

Specifically, the natural disasters recorded last year caused so much damage that the associated losses made 2017 the most expensive year on record in the 38-year history of keeping such data. The following are several reasons that 2017 made headlines for this notorious distinction.

Over a Dozen Events With Losses Totalling More Than $1 Billion Each

The NOAA reports that in total, the recorded losses equaled $306 billion, which is $90 billion more than the amount associated with 2005, the previous record holder. One of the primary reasons the dollar amount climbed so high last year is that 16 individual events cost more than $1 billion each.

Global Warming Contributed to Hurricane Harvey

Hurricane Harvey, one of two Category-4 hurricanes that made landfall in 2017, was a particularly expensive natural disaster. Nearly 800,000 people needed assistance after the storm. Hurricane Harvey alone cost $125 billion, with some estimates even higher than that. So far, the only hurricane more expensive than Harvey was Katrina.

Before Hurricane Harvey hit, scientists speculated climate change could make it worse. They discussed how rising ocean temperatures make hurricanes more intense, and warmer atmospheres have higher amounts of water vapor, causing larger rainfall totals.

Since then, a new study published in “Environmental Research Letters” confirmed climate change was indeed a factor that gave Hurricane Harvey more power. It found environmental conditions associated with global warming made the storm more severe and increase the likelihood of similar events.

That same study also compared today’s storms with ones from 1900. It found that compared to those earlier weather phenomena, Hurricane Harvey’s rainfall was 15 percent more intense and three times as likely to happen now versus in 1900.

Warming oceans are one of the contributing factors. Specifically, the ocean’s surface temperature associated with the region where Hurricane Harvey quickly transformed from a tropical storm into a Category 4 hurricane has become about 1 degree Fahrenheit warmer over the past few decades.

Michael Mann, a climatologist from Penn State University, believes that due to a relationship known as the Clausius-Clapeyron equation, there was about 3-5 percent more moisture in the air, which caused more rain. To complicate matters even more, global warming made sea levels rise by more than 6 inches in the Houston area over the past few decades. Mann also believes global warming caused the stationery summer weather patterns that made Hurricane Harvey stop moving and saturate the area with rain. Mann clarifies although global warming didn’t cause Hurricane Harvey as a whole, it exacerbated several factors of the storm.

Also, statistics collected by the Environmental Protection Agency (EPA) from 1901-2015 found the precipitation levels in the contiguous 48 states had gone up by 0.17 inches per decade. The EPA notes the increase is expected because rainfall totals tend to go up as the Earth’s surface temperatures rise and additional evaporation occurs.

The EPA’s measurements about surface temperature indicate for the same timespan mentioned above for precipitation, the temperatures have gotten 0.14 Fahrenheit hotter per decade. Also, although the global surface temperature went up by 0.15 Fahrenheit during the same period, the temperature rise has been faster in the United States compared to the rest of the world since the 1970s.

Severe Storms Cause a Loss of Productivity

Many people don’t immediately think of one important factor when discussing the aftermath of natural disasters: the adverse impact on productivity. Businesses and members of the workforce in Houston, Miami and other cities hit by Hurricanes Harvey and Irma suffered losses that may total between $150-200 billion when both damage and sacrificed productivity are accounted for, according to estimates from Moody’s Analytics.

Some workers who decide to leave their homes before storms arrive delay returning after the immediate danger has passed. As a result of their absences, a labor-force shortage may occur. News sources posted stories highlighting that the Houston area might not have enough construction workers to handle necessary rebuilding efforts after Hurricane Harvey.

It’s not hard to imagine the impact heavy storms could have on business operations. However, companies that offer goods to help people prepare for hurricanes and similar disasters often find the market wants what they provide. While watching the paths of current storms, people tend to recall storms that took place years ago and see them as reminders to get prepared for what could happen.

Longer and More Disastrous Wildfires Require More Resources to Fight

The wildfires that ripped through millions of acres in the western region of the United States this year also made substantial contributions to the 2017 disaster-related expenses. The U.S. Forest Service, which is within the U.S. Department of Agriculture, reported 2017 as its costliest year ever and saw total expenditures exceeding $2 billion.

The agency anticipates the costs will grow, especially when they take past data into account. In 1995, the U.S. Forest Service spent 16 percent of its annual budget for wildfire-fighting costs, but in 2015, the amount ballooned to 52 percent. The sheer number of wildfires last year didn’t help matters either. Between January 1 and November 24 last year, 54,858 fires broke out.

2017: Among the Three Hottest Years Recorded

People cause the majority of wildfires, but climate change acts as another notable contributor. In addition to affecting hurricane intensity, rising temperatures help fires spread and make them harder to extinguish.

Data collected by the National Interagency Fire Center and published by the EPA highlighted a correlation between the largest wildfires and the warmest years on record. The extent of damage caused by wildfires has gotten worse since the 1980s, but became particularly severe starting in 2000 during a period characterized by some of the warmest years the U.S. ever recorded.

Things haven’t changed for the better, either. In mid-December of 2017, the World Meteorological Organization released a statement announcing the year would likely end as one of the three warmest years ever recorded. A notable finding since the group looks at global land and ocean temperature, not just statistics associated with the United States.

Not all the most financially impactful weather events in 2017 were hurricanes and wildfires. Some of the other issues that cost over $1 billion included a hailstorm in Colorado, tornados in several regions of the U.S. and substantial flooding throughout Missouri and Arkansas.

Although numerous factors gave these natural disasters momentum, scientists know climate change was a defining force — a reality that should worry just about everyone.

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Environment

How to be More eco-Responsible in 2018

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eco-responsible
Shutterstock / By KENG MERRY Paper Art | https://www.shutterstock.com/g/kengmerrymikeymelody

Nowadays, more and more people are talking about being more eco-responsible. There is a constant growth of information regarding the importance of being aware of ecological issues and the methods of using eco-friendly necessities on daily basis.

Have you been considering becoming more eco-responsible after the New Year? If so, here are some useful tips that could help you make the difference in the following year:

1. Energy – produce it, save it

If you’re building a house or planning to expand your living space, think before deciding on the final square footage. Maybe you don’t really need that much space. Unnecessary square footage will force you to spend more building materials, but it will also result in having to use extra heating, air-conditioning, and electricity in it.

It’s even better if you seek professional help to reduce energy consumption. An energy audit can provide you some great piece of advice on how to save on your energy bills.

While buying appliances such as a refrigerator or a dishwasher, make sure they have “Energy Star” label on, as it means they are energy-efficient.

energy efficient

Shutterstock Licensed Photo – By My Life Graphic

Regarding the production of energy, you can power your home with renewable energy. The most common way is to install rooftop solar panels. They can be used for producing electricity, as well as heat for the house. If powering the whole home is a big step for you, try with solar oven then – they trap the sunlight in order to heat food! Solar air conditioning is another interesting thing to try out – instead of providing you with heat, it cools your house!

2. Don’t be just another tourist

Think about the environment, as well your own enjoyment – try not to travel too far, as most forms of transport contribute to the climate change. Choose the most environmentally friendly means of transport that you can, as well as environmentally friendly accommodation. If you can go to a destination that is being recommended as an eco-travel destination – even better! Interesting countries such as Zambia, Vietnam or Nicaragua are among these destinations that are famous for its sustainability efforts.

3. Let your beauty be also eco-friendly

eco-friendly

Shutterstock / By Khakimullin Aleksandr

We all want to look beautiful. Unfortunately, sometimes (or very often) it comes with a price. Cruelty-free cosmetics are making its way on the world market but be careful with the labels – just because it says a product hasn’t been tested on animals, it doesn’t  mean that some of the product’s ingredients haven’t been tested on some poor animal.

To be sure which companies definitely stay away from the cruel testing on animals, check PETA Bunny list of cosmetic companies just to make sure which ones are truly and completely cruelty-free.

It’s also important if a brand uses toxic ingredients. Brands such as Tata Harper Skincare or Dr Bronner’s use only organic ingredients and biodegradable packaging, as well as being cruelty-free. Of course, this list is longer, so you’ll have to do some online research.

4. Know thy recycling

People often make mistakes while wanting to do something good for the environment. For example, plastic grocery bags, take-out containers, paper coffee cups and shredded paper cannot be recycled in your curb for many reasons, so don’t throw them into recycling bins. The same applies to pizza boxes, household glass, ceramics, and pottery – whether they are contaminated by grease or difficult to recycle, they just can’t go through the usual recycling process.

People usually forget to do is to rinse plastic and metal containers – they always have some residue, so be thorough. Also, bottle caps are allowed, too, so don’t separate them from the bottles. However, yard waste isn’t recyclable, so any yard waste or junk you are unsure of – just contact rubbish removal services instead of piling it up in public containers or in your own yard.

5. Fashion can be both eco-friendly and cool

Believe it or not, there are actually places where you can buy clothes that are eco-friendly, sustainable, as well as ethical. And they look cool, too! Companies like Everlane are very transparent about where their clothes are manufactured and how the price is set. PACT is another great company that uses non-GMO, organic cotton and non-toxic dyes for their clothing, while simultaneously using renewable energy factories. Soko is a company that uses natural and recycled materials in making their clothes and jewelry.

All in all

The truth is – being eco-responsible can be done in many ways. There are tons of small things we could change when it comes to our habits that would make a positive influence on the environment. The point is to start doing research on things that can be done by every person and it can start with the only thing that person has the control of – their own household.

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