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Not over the long-term? Unsustainable investment’s ‘black swan’ moment

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We recently reported on the strong relative performance of ethical funds. We contacted a well-paid head of investment research, who succinctly harrumphed, “Not over the long-term.” True, many investors have been unethical, reckless, heartless profiteers in the past (or at least advised to be), but perhaps they’re evolving.

One of the attacks on ethical funds is that their performance (‘over the long-term’) has been at or below the benchmark of less ethical funds. This ignores one critical investment point.

Massim Nicholas Taleb’s exceptional book The Black Swan should be recommended reading for all investors. And certainly for those who think the past performance of ethical funds is any indication of their future potential.

In fact, the book heavily underscores this often-used statement, that past performance is no indicator of future performance. The eponymous black swan is reference to the view that all swans are white, because all the swans you have seen are white, until you see a black one.

Economies always grow, until they contract. House prices boom, until they bust. Commodities are great, until they’re not. Stock markets inexorably rise, until they collapse. Investment must always be unethical and unsustainable, until that strategy ceases being viable.

The Black Swan describes this ‘catastrophe’ – literally, a sudden reversal of what is expected, from the Greek for ‘overturning’ or a ‘sudden end’. Not all change is gradual or incremental.

The highs and lows of the FTSE 100 index, 1984-2011

With two stock market crashes (black swans) in the last 13 years, and with none of the underlying and systemic issues fixed, one would expect that a stock market black swan would feel, well, less black swan-ish.

Companies whose profits come from increasingly-hard-to-extract commodities, with volatile prices from unstable and/or unsavoury regimes or fragile ecosystems, will be increasingly seen as poor choices for investors, especially if they harm society and the planet.

The oil, gas and mining sectors represent 29% of the FTSE 100 by market capitalisation. Investors need a sustainable FTSE 100 built around limitless, domestic, clean energy sources and massively reduced resource usage.

Some companies have begun to realise that climate change and resource scarcity are clear and present dangers to their markets and future profits. Being unethical can unleash a share price hammering backlash in the information age. Sustainability focuses on using less resources, which leads to improved cost stability and higher profits. The stupid corporations, and their misinformed advisers and investors, are the ones that don’t grasp this.

Ethical and sustainable funds have struggled to make headway against the headwinds of unethical and unsustainable funds. However, they are finally reaching critical mass in investor consideration, volume of funds under management and as a preferred investment approach.

Why? Environmentally-literate, digitally-connected and more assertive consumers are entering the investment phase of their lives. Investment has historically been shielded from emerging consumer trends because the high average age of investors themselves (41) and of those who advise them (55). Younger people tend to be digitally connected but in debt (the average age of a first-time buyer is now 37), whereas older people have been historically less connected but do have money to invest.

The £573 billion question

The majority (52%) of the population is 40 or under. They have spent most of their working life aware of environmental issues, and are digitally connected to the facts. 1972 was a pivotal year for environmentalism with the United Nations Conference on the Human Environment being held in Stockholm. The declaration marked the beginning of political and public awareness of global environmental problems. These people have £573 billion in non-property assets. They are less trusting of, or reliant on, established ‘experts’.

This generation is about to start investing seriously and will find the process of investment and choice of funds deeply inadequate and unsatisfactory.

A reverse black swan is therefore now possible for ethical and sustainable funds –a eucatastophe (the sudden happy turn in a story) for the sector. Ethical and sustainable investment strategies that have struggled to be heard above the wild rampaging of profiteers are now enjoying growth.

The question of how to make sustainable and ethical investment mainstream has been reversed to how mainstream investment can become more sustainable and ethical.

For the investment-as-usual crowd, this behavioural shift is catastrophic. It means an inexorably rising number of investors care about sustainability and ethics, rather than just pure profiteering at any cost. In turn, this will hurt the healthy revenue streams and ‘over-taxed’ salaries of the investment-as-usual crowd. Fingers are firmly stuffed into ears and the cry of “not over the long-term” echoes around their moral-free heads.

The long-term is about sustainable, ethical and responsible future performance, rather than any unsustainable, unethical and reckless past.

Further reading:

Financial returns from ethical investment funds ‘better than mainstream’ in last 12 months

10 signs that sustainable investment is going mainstream

Ethical investment: better a diamond with a flaw, than a pebble without

There is such a thing as an unethical investment

The Guide to Sustainable Investment 2013

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.

Environment

How to Build An Eco-Friendly Home Pool

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eco-friendly pool for home owners
Licensed Image from Shutterstock - By alexandre zveiger

Swimming pools are undoubtedly one of the most luxurious features that any home can have. But environmentally-conscious homeowners who are interested in having a pool installed may feel that the potential issues surrounding wasted water, chemical use and energy utilized in heating the water makes having a home swimming pool difficult to justify.

But there is good news, because modern technologies are helping to make pools far less environmentally harmful than ever before. If you are interested in having a pool built but you want to make sure that it is as eco-friendly as possible, you can follow the advice below. From natural pools to solar panel heating systems, there are many steps that you can take.

Choose a natural pool to go chemical free

For those homeowners interested in an eco-friendly pool, the first thing to consider is a natural pool. Natural swimming pools utilise reed bed technology or moss-filtration to naturally filter out dirt from the water. These can be combined with eco-pumps to allow you to have a pool that is completely free from chemicals.

Not only are traditional pool chemicals potentially harmful to the skin, they also mean that you can contaminate the area around the pool if chemical-filled water leaks or is splashed around. This can be bad for your garden and the environment general.

It will be necessary to work with an expert pool builder to ensure that you have the expertise to get your natural pool installed properly. But the results with definitely be worth the effort and planning that you have to put in.

Avoid concrete if possible

The vast majority of home pools are built using concrete but this is far from ideal in terms of an eco-friendly pool for a large number of reasons. Concrete pools are typically built and then lined to stop keep out any bacteria. This is theoretically fine, except that concrete is porous and the lining can be liable to erode or break which can allow bacteria to enter the pool.

It is much better to use a non-porous material such as fibreglass or carbon ceramic composite for your pool. Typically, these swimming pools are supplied in a one-piece shell rather than having to be built from scratch, ensuring a bacteria-free environment. These non-porous materials make it impossible for the water to become contaminated through bacteria seeping into the pool by osmosis.

The further problem that can arise from having a concrete pool is that once this bacteria begins to get into the pool it can be more difficult for a natural filtration system to be effective. This can lead to you having to resort to using chemicals to get the pool clean.

Add solar panels

It is surprising how many will go to extreme lengths to ensure that their pool is as eco-friendly as possible in terms of building and maintaining it but then fall down on something extremely obvious. No matter what steps you take with the rest of your pool, it won’t really be worth the hassle if you are going to be conventionally heating your pool up, using serious amounts of energy to do so.

Thankfully there are plenty of steps you can take to ensure that your pool is heated to a pleasant temperature while causing minimal damage to the environment. Firstly, gathering energy using solar panels has become a very popular way to reduce consumption of electricity as well as decreasing utility bills. Many businesses offer solar panels specifically for swimming pools.

Additionally, installing an energy efficient heat pump or boiler to work in conjunction with your solar panels can be hugely beneficial.

Cover it!

Finally, it is worth remembering that there are many benefits to investing in a pool cover. When you cover your pool you increase its heat retention which stops you from having to power a pump or boiler to keep it warm. This works in conjunction with the solar panels and eco-friendly heating system that you have already had installed.

Additionally, you cover helps to keep out dirt and other detritus that can enter the pool, bringing in bacteria. Anything that you can do to keep bacteria out will be helpful in terms of keeping it clean.

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Features

4 Ways To Get a Green House in 2018

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green house and homes
Featured Image From Shutterstock - By Photographee.eu

Demand for green houses is surging. In 2020, almost 20% of all homes on the market will be green.

If you would like to buy a green home, this is a great time to look into it. Prices are still pretty low and there are a lot more financing options available than there were right after the recession.

If you’re thinking about buying a house, now could be a very good time to make the move! A number of factors in the housing market right now mean that you might be able to afford your dream home. Although in many parts of the country house prices are still rising, if you do your research and plan wisely, there are lots of good schemes to help you get your foot on the property ladder, or trade up to the house you’ve always wanted.

Interest Rates and Stamp Duty

Although the Bank of England raised interest rates by 0.25% recently, they remain very low, which is good news if you’re thinking of taking out a mortgage. However, rates may not stay low and it’s predicted that there’ll be a further rate rise during 2018, so don’t wait too long. Another factor that’s going to help first time buyers in particular is the Chancellor’s decision to abolish stamp duty for first timers purchasing properties for under £300,000.

Different options

For many people looking to buy a green home, raising a deposit of between 5% and 20% may not be a realistic option, in which case there are a growing number of schemes to help. Increasingly popular are shared ownership schemes, through which the buyer pays a percentage of the full value of the property (typically between 25% and 75%) and the local council or a housing association pays the rest, and takes part ownership. This is suitable for buyers who may struggle to meet the up-front costs of buying outright. There will often be a service charge or management fees to pay in addition to the mortgage. The Government’s Help To Buy scheme is a good place to start looking if you’re interested in this option. This scheme is now available to people looking to buy green homes too.

ISA Options

If you’re still saving for a deposit, another scheme is the Help to Buy ISA. You can get a 25% boost to your savings on amounts up to £200 per month with this scheme. It’s only open to first time buyers and you can claim a maximum of £3000.

Other costs

Green home buyers are going to run into a number of other ancillary costs, most of which are common to other homebuyers.

When calculating how much you can afford, it’s vitally important to remember that buying a house comes with a whole host of other costs. Depending on the cost of the property that you’re buying, you may have to pay stamp duty of anywhere between 1% and 5%. There’ll be estate agents fee if you’re also selling a property, although there are a wide range of online estate agents operating such as Purple Bricks or Right Move that have lower fees than traditional high street companies. Conveyancing costs to a solicitor can add another £1000-£3000 and you may need to take out life insurance and hire a moving firm.

There are other initial costs such as, fixing parts of the home that aren’t upto your taste. Getting new furniture to fill up all the new-found space in your new home. If you are moving away from the city, you need to consider the cost of transportation as well, as it can take up quite a lot over time. Take your time, do your homework and shop around and soon you could be getting the keys to your perfect home.

I hope this article was useful for you to learn more about the basics that you need to be aware of before you start the process of buying your first home. If you have any doubts with regards to this, let us know through the comments and we will be glad to help you out. If you have any suggestions regarding how we can improve the article, let us know them through the comments as well for us to improve.

Do you have any other reservations against buying your first home? Do you see your house as an asset or a liability? Do you think it is important for everyone to get themselves a new home? Let us know through the comments.

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