Every autumn, the financial press spends seven short days focusing on ethical investment. The rest of the year, it returns to writing about the business of screwing over people and the planet for a percentage (or often a fraction of a percentage) of profit. Despite just 2% of the year spent covering the themes and nuances of ethical investment, the odd troll and article creeps out that pours scorn on the whole thing.
If you invest solely for profit maximisation, then look away now, as Blue & Green Tomorrow is going to let you into a little secret that might surprise or even shock you. It’s a big one, so steel yourselves.
People who invest ethically… do so for ethical reasons. The clue, as it were, is in the name.
There, we told you it would surprise or shock you.
There are large of numbers people who invest solely for profit, regardless of the consequences or costs. There are a smaller number of more enlightened and engaged investors, who consider the planet and people, too.
Focusing on returns, performance and profit ignores the more balanced, some would say more sustainable, consideration of planet, people and profit that ethical investors choose to make
We highlighted a partial journalistic hatchet job earlier this week. The rather more impartial Dan Hyde of This is Money acknowledged that “some of the biggest ills in the modern world have been caused by a narrow focus on profit at any cost”. He then points out that “ethical funds have a sluggish record” when it comes to performance.
If ethical investment isn’t ‘strangling returns’ in one article, it’s delivering ‘sluggish’ ones in another.
This ‘strangling’ and ‘sluggish’ record is a debatable fact, as analysis by Worldwise Investor has shown us. Nevertheless, performance at any cost is not the only focus of ethical investors.
If, like us, you accept Hyde’s first argument that some of the biggest ills have been caused by a narrow focus on “profit at any cost”, you might feel tempted to ask the question, “Is there an alternative?” And you, like us, probably want the answer to be ‘yes’, which is the very essence of National Ethical Investment Week; to explore alternative, less harmful investment strategies.
But before we can even consider the alternatives and nuances in any depth, the cold water of “sluggish returns” is always, and erroneously, poured on the debate.
Only chocolate or only celery
Hyde uses a metaphor of choosing chocolate or celery to illustrate the dilemma for investors between doing what is right and what is most profitable. He makes our point for us perfectly. Chocolate is an unhealthy indulgence and celery is the healthier option. Chocolate is great, some would say divine, in small fair-trade doses, but celery is clearly better for you.
The problem with this rather excellent metaphor, writ large from an investment perspective (financial trades that outstrip real world trade 26:1), is that we are pursuing an unhealthy indulgence on a planetary scale.
People are dying right now, because of what we invest in, biodiversity is being destroyed and we are rapidly depleting the finite resources that our economy depends on. All of this leaves an ecological and economic disaster for our children. We are living wholly on a diet of chocolate. And it’s making us, our children, our economy and our planet sick.
Research is the key
Recognising these motivations and differences would surely be sensible in any well-researched article on the subject. There are 137 funds with intelligent and articulate managers to interview; there are nearly 60 specialist financial advisers who have thousands of clients; a handful of open and honest industry bodies with tonnes of statistics and 750,000 investors who invest in this way.
Those nice people at Bridges Venture published an excellent diagram in a recent report that illustrates the continuum from traditional investment, based on securing competitive returns, all the way through to philanthropy, based on little or no financial return.
Commentators who focus solely on profit are missing the point entirely
Ending every article about ethical investment with dire warnings about ‘strangling returns’ and ‘sluggish performance’ misses the whole point.
Focusing on returns, performance and profit ignores the more balanced, some would say more sustainable, consideration of planet, people and profit that ethical investors choose to make.
Some investors hold religious beliefs which forbid certain investments, and it is probably not wise to attack people’s faith so casually; especially when the outcome of those beliefs is a less harmful style of investment.
Some investors have strong moral convictions and would feel uncomfortable investing in something that they profoundly disagree with. We can see no harm in excluding things you find morally repugnant. In fact, it would be very odd indeed to invest in things that you do think of in this light.
Others see mature mining and energy-intensive industries as poor long-term investment options. They see innovation in healthcare and clean technology as a better place for their money. Again, this is a perfectly logical response to a devil-may-care attitude to investment that has historically contributed to the “biggest ills in the modern world”.
Profit at any cost is not the only show in town
Of course, we would all make a lot more money – millions do – if we only invested in oil and gas, mining, alcohol, pornography, gambling, tobacco and weapons. But we choose to avoid these and focus on companies that are developing new jobs and industries, protecting society, the environment and their own workforces, and still returning a profit.
As long as commentators with a lot of influence and reach talk the ethical sector down in overly-brief articles, often littered with misinformation and quotes from the uninformed, it will struggle to thrive
Markets are based on confidence. Investors can be confident that in the short-term, oil, gas and mining stocks are safe bets.
Global energy and consumer demand is rising and supply is becoming harder to maintain. Our current economic model relies on oil, gas and minerals.
As long as tobacco companies find new territories to sell cancer sticks, with no public health programmes, they too will be highly profitable.
Demand for porn, gambling and alcohol is pretty resilient, despite the enormous human cost and cost to public health systems. Humans being humans, we’ll keep fighting wars.
Yes, all these options maximise your profit. But, the future that investing in these stocks creates is disastrous for the long-term.
We shouldn’t forget that governments around the world are tinkering with tax breaks in renewable energy, in particular, making it hard for investors who favour clean and limitless energy to gain regulatory certainty.
There’s nothing arbitrary about National Ethical Investment Week; it’s a chance to explore the issues with a little depth, in the same vein as Fairtrade Fortnight and Move Your Money month.
As long as commentators with a lot of influence and reach talk the ethical sector down in overly-brief articles, often littered with misinformation and quotes from the uninformed, it will struggle to thrive.
But the long-term prospects are bright for ethical investment. Worldwide, the sector enjoys strong in-flows of funds, especially from high net-worth investors. It will also become an increasingly necessary style of investment, as Hyde rightly acknowledges, “Economies in Asia and around the world may well have to turn to alternative energy if oil, gas and other fossil fuels start to run dry.” But stocks cannot thrive when confidence is weak.
Of over 3,000 funds available, only 137 fit into the ‘ethical’, ‘responsible’ to ‘impact-first’ category.
We genuinely wish that the financial press would focus their quality writers, significant influence and huge reach on investigating the massive and real harm the majority of funds are doing to our environment, society and economy, rather than sniping at those that aspire to do some good.
If you would like to know more about the sector and receive copies of our most recent reports, you can sign up to our weekly newsletter here.
2017 Was the Most Expensive Year Ever for U.S. Natural Disaster Damage
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.
How to be More eco-Responsible in 2018
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.
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
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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