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Sustainable investment is built on trust

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Trust is vital to socially responsible investing (SRI) and funds are now digging much deeper into potential investments, says Richard Essex.

This article is an extract from Richard Essex’s 2014 book, Invest, Feel Good and Make a Difference, which is available now on Amazon.

Trust is vital for the success of your investment and in encouraging you to invest more; and the fund manager is aware of this need to be trusted. They know that their personal success will be hugely influenced by this trust. Claudia Quiroz, fund manager for the Quilter Cheviot ‘Climate Assets Fund’, supports this view.

As well as ensuring capital growth on clients’ capital she states the following, “I additionally deal with very knowledgeable clients, making my job more exciting and more challenging. My clients understand the changes occurring in the market place and how a growing global population drives the demand for resources and the need to reduce carbon emissions. This means that I am much more accountable for the investment decisions that I make as my clients know very well the companies that are offering the right products and services to solve these sustainability problems.”

But this building of trust doesn’t just happen by accident. It is a result of, I believe, a more thorough research process than has been the case in the past. The genuine funds in this area are now combining traditional financial screening with wider social and environmental research.

As a result they are digging much deeper into the heart and head of potential companies, and this is having positive results. An example would be the Ecclesiastical Amity International Fund, which won the prestigious Lipper award in 2011 as the best global equity fund over five years.

A key element of the fund is that an in-house SRI team work alongside financial analyst colleagues. The SRI team will apply more rigid negative screens and then, more importantly, assess stocks on environmental, social and governance factors, looking particularly where companies are sustainability leaders in their sectors. The financial analysts will then look at colder financial data, such as earnings quality and cash flow. Both these activities tend to be primary screens, which will then be followed by company meetings.

The combination of the financial and SRI perspective provides the basis for more insightful research to be carried out at these meetings. This not only leads to more conviction buys but encourages greater engagement between the fund manager and the company executives.

A good indicator of this engagement can be seen by the number of votes cast by Ecclesiastical, as a stakeholder, on company resolutions. Between April and July 2012 they voted at 119 meetings. We now also see that this field encourages study, which is advancing the quality of fund research. In this regard there is also the work of Buntz and Nguyen from Pictet who are looking at a more refined model for a quality sustainable investment. It was only by being in the environmental space that they were able to see how additional financial factors can work hand in hand with ecological governance to produce a successful stock.

Not all SRI investments meet the required standard

This is not to say that the SRI area is completely bullet-proof from less trustworthy operations. From time to time advisers, like myself, will be pitched to by funds without the necessary credentials. These are often sold on the basis of some fantastic return but without the due diligence required to meet an SRI standard. Reassuringly these are often spotted by professional advisers.

Last year, for example, I was attending an Ethical Investment Association (EIA) meeting and we were being pitched to by a prospective scheme representative. The scheme being sold was a reforestation project somewhere in South America. One of the audience members asked the speaker whether the necessary care had been taken to respect bio-diversity when forests were being re-planted. For those of you unfamiliar with the term this is where the surrounding habitat, including plant and animal life is respected and preserved as best as possible. The pitcher had no idea how to respond. In fact it was obvious that he had no understanding of bio-diversity.

This is typical of many approaches where the pitchers completely misunderstand the motivation of their potential investors and try and lure people with financial returns only. Therefore, as a potential investor it’s always worth asking these questions, and if you are not sure speak to a professional SRI adviser.

So we can see that there is a real desire for fund managers to engender trust. But where is the source of all this trust. Ultimately it will depend upon the ethos of the company that you are investing in. It’s worth remembering of course that these companies are simply formed of people like you and I.

Richard Essex is an independent financial adviser with Grayside Financial Services, where he is a specialist for green and SRI advice. He is also on the steering committee with the Ethical Investment Association, a member of the UK Sustainable Investment and Finance Association (UKSIF) and the author of the 2014 book, Invest, Feel Good and Make a Difference.

Photo: bernadg via flickr

Further reading:

Sustainable investors can see where they’re investing

The sustainable investor is no longer marginal

You can get a healthy return by investing sustainably – and here’s proof

How sustainable investment has already changed the world

Breaking the eight myths of sustainable and responsible investment

Richard Essex is an independent financial adviser with Grayside Financial Services, where he is a specialist for green and SRI advice. He is also on the steering committee with the Ethical Investment Association, a member of the UK Sustainable Investment and Finance Association (UKSIF) and the author of the 2014 book, Invest, Feel Good and Make a Difference.

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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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