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Sustainability: a real growth opportunity for investors



On Thursday last week, I had probably my most positive and interesting meeting with a fund manager, when I met Charlie Thomas of Jupiter Ecology fund, who had come in to update us on his fund after 10 years as the fund manager.

Despite all the negativity around the environment in the UK, with David Cameron appearing to do a U-turn on green subsidies, Thomas brushed these aside, saying he sees “real growth in renewables in emerging markets over the next 10 years“.

Well, he would say that, wouldn’t he?” I hear you say. He is, after all, running a fund in the sustainability field and there is no doubt that you often need to take a fund manager’s comments with a pinch of salt. But I have reason to sit up and listen to him, because a year ago he told me he was starting to reinvest in renewables companies because he saw their value position turning.

Stuart Ryan, our investment manager at Holden & Partners, reminded me that I had been slightly sceptical. How right Thomas was! Renewable energy companies in the last year have outperformed the FTSE World Index by a factor of three if the performance of the Guinness Alternative Energy fund, which is up 98% year-on-year to date, is anything to go by.

The sustainability stock market has exploded

Of course it is not just this. It is that Thomas has been around managing his fund now for 10 years and he has lots of interesting insights into the market. When he started managing the fund in 2003, it was a pseudo UK equity fund with 61% of stocks invested in the UK. Today, only 20% is invested in the UK.

Thomas sees this not as a specific geographic choice but as a reflection of the universe of stocks he is able to invest in now. In 1993, the universe the fund had to pick from was 95, this had grown to 310 in 2003 and in 2013 it is now 1,200. In short the stock market has exploded for a fund manager interested in sustainable solutions.

Pollution, water and food are massive issues for the Chinese

Thomas pointed out that UK politics will not materially dent this market because it is the emerging economies who will be the ones to really drive the sustainability markets. He is recently back from a trip to China in May. “Forty-five per cent of Chinese GDP is situated in areas of water scarcity”, he said. The Chinese are aware of this and trying to address it, because otherwise this will impact on long-term development in the country.

Thomas explained too, that the rising middle classes are all too aware of the pollution they are exposed to, and telecommunications means that government cannot lock down on information. He said in Shanghai, they now put large tents over school playgrounds so children can play in filtered air. “Pollution, water and food are massive issues” for the Chinese.

It was not publicised, but while he was in Shanghai, the whole chicken population was slaughtered because of a disease issue, so there was no chicken on the menus in any of the restaurants.

Thomas concluded that the core issues of sustainability funds – water, food and energy – are moving from the niche to the mainstream, with Thomas stating that he was more excited about this sector than ever before, and it should be a part of all mainstream portfolios. So good news, which he was able to explain with reference to some great slides.

Sustainable funds tend to have long stock holding periods and minimal benchmark overlap

The data he could draw on and the long-term view he was able to take were impressive, but then a fund manager with a holding period for each stock of five to seven years has the ability to really consider what he is doing. If you are not turning over the portfolio every year, you have got time to do some real thinking and analysis.

Fifty per cent of the stocks held in 2003 in the top 20 holdings of the Jupiter Ecology fund are still in the top 20 holdings in 2013. Thirty-five per cent of the stocks held in 2003 were taken over by other companies and 15% of the stocks were sold.

The Jupiter Ecology fund has two benchmarks: the FTSE World and the FTSE ET100, but the fund does not mirror either. Thomas said that the stocks he invests in overlap 0.7% with the FTSE World and 40% with the FTSE ET100, but neither reflects what the Jupiter Ecology fund does (Jupiter Ecology is up 31% in the last year versus FTSE World which is up 25%).

Is this, though, not what we should be all paying a fund manager for? And is this not a great demonstration of why mainstream portfolios considering risk and diversification should be investing in sustainability funds?

My view is that investment is for the long-term and as a starting point, all portfolios should look to have 10% of their exposure to sustainable investment approaches.

As investors, we should be looking not only to what the future holds, or taking what Bank of England governor Mark Carney might call ‘forward guidance’, but also have an eye on risk and diversification. Sustainable investing provides an answer to both of these issues.

Investors, take note, because it is an area that Charlie Thomas is now ‘more excited about… than ever before’ and sees ‘real growth’.

Mark Hoskin is a partner at Holden & Partners, chartered financial planners who provide financial advice to high net-worth clients, the majority of whom have a significant interest in ethical or environmental issues. This article originally appeared on Blue & Green Tomorrow’s sister site, Blue & Green Investor.

Further reading:

Investing in the future: smart investment trends

Sustainable investment in the age of technology

The sustainable investment tipping point is now

Green versus grey infrastructure

‘Saints or sinners’ of ethical investing is out of date thinking

Mark Hoskin is a partner at Holden & Partners, chartered financial planners who provide financial advice to high net-worth clients, the majority of whom have a significant interest in ethical or environmental issues.


New Zealand to Switch to Fully Renewable Energy by 2035



renewable energy policy
Shutterstock Licensed Photo - By Eviart /

New Zealand’s prime minister-elect Jacinda Ardern is already taking steps towards reducing the country’s carbon footprint. She signed a coalition deal with NZ First in October, aiming to generate 100% of the country’s energy from renewable sources by 2035.

New Zealand is already one of the greenest countries in the world, sourcing over 80% of its energy for its 4.7 million people from renewable resources like hydroelectric, geothermal and wind. The majority of its electricity comes from hydro-power, which generated 60% of the country’s energy in 2016. Last winter, renewable generation peaked at 93%.

Now, Ardern is taking on the challenge of eliminating New Zealand’s remaining use of fossil fuels. One of the biggest obstacles will be filling in the gap left by hydropower sources during dry conditions. When lake levels drop, the country relies on gas and coal to provide energy. Eliminating fossil fuels will require finding an alternative source to avoid spikes in energy costs during droughts.

Business NZ’s executive director John Carnegie told Bloomberg he believes Ardern needs to balance her goals with affordability, stating, “It’s completely appropriate to have a focus on reducing carbon emissions, but there needs to be an open and transparent public conversation about the policies and how they are delivered.”

The coalition deal outlined a few steps towards achieving this, including investing more in solar, which currently only provides 0.1% of the country’s energy. Ardern’s plans also include switching the electricity grid to renewable energy, investing more funds into rail transport, and switching all government vehicles to green fuel within a decade.

Zero net emissions by 2050

Beyond powering the country’s electricity grid with 100% green energy, Ardern also wants to reach zero net emissions by 2050. This ambitious goal is very much in line with her focus on climate change throughout the course of her campaign. Environmental issues were one of her top priorities from the start, which increased her appeal with young voters and helped her become one of the youngest world leaders at only 37.

Reaching zero net emissions would require overcoming challenging issues like eliminating fossil fuels in vehicles. Ardern hasn’t outlined a plan for reaching this goal, but has suggested creating an independent commission to aid in the transition to a lower carbon economy.

She also set a goal of doubling the number of trees the country plants per year to 100 million, a goal she says is “absolutely achievable” using land that is marginal for farming animals.

Greenpeace New Zealand climate and energy campaigner Amanda Larsson believes that phasing out fossil fuels should be a priority for the new prime minister. She says that in order to reach zero net emissions, Ardern “must prioritize closing down coal, putting a moratorium on new fossil fuel plants, building more wind infrastructure, and opening the playing field for household and community solar.”

A worldwide shift to renewable energy

Addressing climate change is becoming more of a priority around the world and many governments are assessing how they can reduce their reliance on fossil fuels and switch to environmentally-friendly energy sources. Sustainable energy is becoming an increasingly profitable industry, giving companies more of an incentive to invest.

Ardern isn’t alone in her climate concerns, as other prominent world leaders like Justin Trudeau and Emmanuel Macron have made renewable energy a focus of their campaigns. She isn’t the first to set ambitious goals, either. Sweden and Norway share New Zealand’s goal of net zero emissions by 2045 and 2030, respectively.

Scotland already sources more than half of its electricity from renewable sources and aims to fully transition by 2020, while France announced plans in September to stop fossil fuel production by 2040. This would make it the first country to do so, and the first to end the sale of gasoline and diesel vehicles.

Many parts of the world still rely heavily on coal, but if these countries are successful in phasing out fossil fuels and transitioning to renewable resources, it could serve as a turning point. As other world leaders see that switching to sustainable energy is possible – and profitable – it could be the start of a worldwide shift towards environmentally-friendly energy.


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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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