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The growth, drivers and choice behind ethical investment

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Mark Robertson recently left his post as head of communications at responsible investment research firm EIRIS. Here, in a valedictory article that originally appeared in The Guide to Ethical Funds 2013, he looks back on the rise in prominence of sustainable investment.

2013 marks 30 years since EIRIS was established as the UK’s first independent research organisation for green and ethical investment.  From niche to mainstream, from UK to global, from individual interest to institutional interest, EIRIS has evolved with the green and ethical investment industry and has been at the centre to push it forward over the last three decades.

Given the credit crunch and financial crisis, plus unethical behaviour at scandal-hit banks, it’s not surprising that growing numbers of consumers across Europe and elsewhere are looking for financial products that offer a more ethical, sustainable and long-term approach to finance.

Growth

Latest statistics from EIRIS show that there’s currently around £11 billion invested in over 100 green and ethical funds. That’s up from £4 billion 10 years ago. Last year, UK ethical banks such as the Co-operative and Triodos attracted more than 100,000 new customers at a time when many high street banks were hit by a series of scandals including Libor fixing at Barclays, UBS and the Royal Bank of Scotland, and HSBC and Standard Chartered falling foul of American regulators.

Against a backdrop of rising energy prices, a growing population and increased competition for dwindling natural resources, climate change, human rights and increased focus on supply chain ethics, sustainability issues have never been more relevant to investors

Meanwhile, statistics from the Global Sustainable Investment Alliance 2012 Review found that some $13.6 trillion (£8.6 trillion) was invested sustainably or responsibly worldwide.

Drivers

So what’s behind the growth in green and ethical investment and which factors are likely to increase demand?

Sustainability megatrends continue to make the case for long-term, sustainable investment. There is a growing need to ‘do more with less’ in the context of population growth, climate change and resource availability, particularly with regards to pollution, and the consumption of energy and water resources.

Those investors that reduce risk and maximise investment opportunities by seeking out companies which have the best performance on environmental, social and governance (ESG) issues, or by engaging with companies to improve performance, will be best placed to manage the global challenges that are coming our way.

At the same time, growing consumer interest in green and ethical issues such as climate change, animal welfare, fair trade, human rights and the environment is encouraging more consumers to consider green and ethical financial products.

Corporate scandals and high-profile failings at big companies continue to shine a spotlight on sustainable investment. You only have to look at failures at BP, News Corporation, Vedanta and Olympus to see the importance of understanding and improving corporate performance on ESG issues.

There’s now greater accountability and more focus on the extent to which investee companies are compliant with global norms and conventions such as the UN Global Compact and the UN Environment Programme Finance Initiative.

Investors are becoming more active shareholders by engaging with companies to improve their sustainability performance and integrating ESG issues into voting decisions, especially on key issues such as executive pay.

An increasing number of stock exchanges around the world have also implemented initiatives aimed at driving improvements in corporate disclosure and performance on ESG issues.  In 2001 EIRIS began working with FTSE on the development of its FTSE4Good Indices which are only open to those companies that meet globally recognised corporate responsibility standards.

Choice

Mainstreaming green and ethical investment is about ensuring a good range of green and ethical financial products are available to all consumers across all aspects of ethical finance.

The issues which many ethical funds seek to address through their investment policies are still as live and important to investors as they were 30 years ago. Guns and weapons still kill people; huge health risks still exist around alcohol and tobacco; and pornography and gambling are still highly controversial business activities to some.

Corporate scandals and high-profile failings at big companies continue to shine a spotlight on sustainable investment

Against a backdrop of rising energy prices, a growing population and increased competition for dwindling natural resources, climate change, human rights and increased focus on supply chain ethics, sustainability issues have never been more relevant to investors.

Ethical and responsible investment strategies are therefore moving beyond simple negative screens to also take into account the material risks and investment opportunities which these challenges pose.

Opinions and views vary so it’s vital that different green and ethical funds exist to enable people to invest in line with their own beliefs or concerns. The good news is that with over 100 green and ethical funds available, there’s now more choice to investors than ever before.

However, it’s also vital that retail fund managers embed material, sustainable investment principles across all funds under management, not just in the green and ethical funds they offer.

In the same way that cafés are moving from offering Fairtrade coffee as an optional extra to ensuring that all the coffee they serve is Fairtrade, financial institutions need to stop thinking of sustainability as an ‘add-on’ and instead integrate it into all of the investments they make.

Green and ethical funds have acted as a catalyst for this by demonstrating the benefits of integrating ESG issues into financial decisions to reduce risks and maximise returns.

Looking back over last three decades, there is a lot we can all be proud of, but equally there’s still a lot left to do. We need an even greater range of financial products that enable investors to invest in line with their ethics and to provide access to the many exciting new types of sustainable investment themes and opportunities which exist.

For green and ethical investment to be really effective, we also need mainstream fund managers to report back to their customers on how they are adopting longer-term sustainable investment principles across all their investments.

Around the world, millions of investors across the world continue to support ethical investment by investing in funds which have driven improvements in corporate behaviour and acted as a catalyst for positive change in financial institutions by championing the advantages of long-term, sustainable investment.

Looking ahead, there is scope for ethical and responsible investment to achieve so much more. I hope financial institutions rise to this challenge by making ESG issues a key part of the investment. Give the sustainability challenges which we all face, we can’t afford for them not to do so.

Mark Roberton is ex-head of communications at EIRIS.

Further reading:

£11 billion invested ethically in the UK: infographic analysis

$13.6tn invested sustainably worldwide, says study

Sustainable investment flourishes amongst European high net-worth individuals

What kind of investor are you?

The Guide to Ethical Funds 2013

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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