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Not just unethical, tobacco is a financially unsustainable investment

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It may be unethical and immoral to profit from companies that sell addictive, cancer-causing drugs to children in places with little or no public health or education, but it is also financially unsustainable in the long-term, writes Alex Blackburne on No Smoking Day.

Smoking is responsible for one in 10 adult deaths globally, according to the World Health Organisation. That’s one death every six seconds. By the time you’ve read this article, 350 more people will have died from smoking related diseases.

But investors arguing the case for not investing in tobacco would often be left floundering in debates with their mainstream counterparts.

Tobacco companies were seen as good, sensible defensive stocks with solid track records in performance. This apparently trumped the moral or ethical questions associated with selling addictive, cancer-causing drugs to children and vulnerable adults.

This raises wider points about ethical investment, which is primarily the screening out of sectors and companies deemed unethical. Tobacco is among the sectors most commonly avoided; others include the arms trade, gambling, pornography and others.

Ethical investment, while still hugely important, is not necessarily going to change the world at the pace required. Plus, there is always going to be someone on the other side of the fence willing to passionately argue that profit is the only – or at least primary – consideration when investing.

We face serious sustainability challenges, few more urgent than climate change, and simply avoiding potentially unethical sectors is not going to address this. We need investment in solutions instead.

So the momentum in 2014 is with sustainable investment and the factoring in of environmental, social and governance (ESG) issues. It is about investing in companies providing real answers to the world’s biggest problems and hedging against some of the risks that come with them.

For years, tobacco has been the poster child of unethical investment; less of a ‘sin stock’ and more of a ‘death stock’. But a growing number of sustainability-minded investors now see tobacco in a different light – one that has the potential to create a sea change in the mainstream investment world. Why? Because it revolves around the one thing the majority of investors care about the most: profit.

Regulation of the tobacco industry is increasingly tight. In Australia, cigarettes are sold in plain packaging to reduce the attractiveness of smoking. Stark health warnings, accompanied by shocking images, now adorn each packet.

Does plain packaging encourage smokers to quit? Kylie Lindorf, who chairs Cancer Council Australia’s National Tobacco Issues Committee, said in May last year that Quitline, the smoking helpline in Australia, was receiving considerably more calls since plain packaging was introduced in December 2012.

She added, “Many, many smokers have commented that they don’t like the look of the new packs and also believe the taste of the cigarettes is worse, even though the tobacco companies have confirmed that the product is the same. This proves just how powerful packaging is in conveying messages about supposed quality and features of a certain brand.”

Elsewhere, the World Health Organisation’s Framework Convention on Tobacco Control (FCTC) – the world’s first modern-day global public health treaty – came into force in 2005.

Set up “to protect present and future generations from the devastating health, social, environmental and economic consequences of tobacco consumption and exposure to tobacco smoke”, it is signed by 177 countries accounting for 90% of the world’s population.

Along with plain packaging, it calls for smoking bans in public places, better public health education and for signatories to use “price and tax measures” to help reduce consumption.

The Framework Convention Alliance was formally established in 2003 to help develop and implement the FCTC. A live counter on its website states over 70 million people, and counting, have died from “tobacco-related diseases” since the first FCTC working group came together 15 years ago.

While this is going on, education in the developing world – where many of the biggest tobacco firms continue to sell their products to children – is improving steadily. As countries in Africa and Asia become increasingly developed, children will begin to understand that smoking is bad for you.

These regulatory factors make investment in tobacco ever-more unsustainable, according to Peter Michaelis, head of sustainable and responsible investment at Alliance Trust.

In an article for Blue & Green Investor last year, he wrote, “To own British American Tobacco or any of the other tobacco companies, you need to believe that the Framework Convention Alliance for Tobacco Control will have little impact and that the rest of the world will follow a very slow fall in the rates of smoking.

We believe there are real risks to this scenario. The FCTC shares the lessons learned by governments in the campaign to end smoking and covers 90% of the world population. We would expect much more rapid control and decline in tobacco volumes as a result.”

We are seeing tighter regulation globally and improving education in the developing world. This is leading to a growing consensus of investors believing that tobacco companies will slowly start to lose value.

Perhaps the tobacco companies themselves see this, too. Many have pumped huge amounts of money into developing e-cigarettes in recent years, for example.

However, a better way to adapt to the coming changes would be to reframe the mission of Imperial Tobacco, British American Tobacco, Philip Morris and co. These firms have some very skilled individuals and huge reach and influence globally. Why not use this expertise to deliver vital drugs to those most in need instead?

Michaelis concluded in his article, “In short: society is acting against tobacco companies and they will see their earnings decline. We are currently in a sweet spot where tobacco companies are growing. This will not last, and investors who extrapolate this growth are likely to see severe losses.”

The divestment case for tobacco is therefore – in many ways – even more incontestable than the one for fossil fuels, where many investors opt for engagement in an effort to shift a firm’s long-term priorities.

Arguing that you need to make a profit is simply not good enough anymore. Though if you are adamant about this being your sole investment mission, tobacco – given what we know – would be an unwise thing to invest in.

Further reading:

Blowing smoke in Africa: big tobacco and child smokers

Fighting the long fight against tobacco

Describing tobacco as a ‘defensive stock’ is offensive

Raise tobacco taxes to save 200m lives, scientists say

Tobacco: investing in death

Economy

How Going Green Can Save A Company Money

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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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Energy

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

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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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