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The World of Ethical Investment

Penny Shepherd gives the case for ethical investment and participants from each segment of the community provide their reactions.

Penny Shepherd, Sustainable Investment & Finance Association (UKSIF)

Many of us are increasingly concerned with the wider impact of our purchasing choices. Household spending on ethical goods and services has grown by 18 percent over the last two years, despite the economic downturn, while the financial crisis has prompted a new level of concern about whether investments and savings are ‘socially useful’. As a Financial Times article last year said, “One positive result of the credit crisis has been a renewed interest in the purpose of investment; owning assets that will add value to society rather than financial engineering.”

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Penny Shepherd gives the case for ethical investment and participants from each segment of the community provide their reactions.

Penny Shepherd, Sustainable Investment & Finance Association (UKSIF)

Many of us are increasingly concerned with the wider impact of our purchasing choices. Household spending on ethical goods and services has grown by 18 percent over the last two years, despite the economic downturn, while the financial crisis has prompted a new level of concern about whether investments and savings are ‘socially useful’. As a Financial Times article last year said, “One positive result of the credit crisis has been a renewed interest in the purpose of investment; owning assets that will add value to society rather than financial engineering.”

This growing awareness and concern is fuelling a movement towards more sustainable and responsible financial services. Much like the decision to buy ethical or fair-trade goods, you can now make corresponding choices when it comes to your savings and investments.

Those who would like their money to make a positive contribution to the world are not alone. Research for National Ethical Investment Week in 2010 found that more than half (54 percent) of all GB adults with investments want to make both money and a difference. Only a small percentage of people are willing to make a trade-off, though, to accept a lower financial return. Many are also more concerned about understanding the risks involved in how their money is invested – is it invested in ways that have high social and environmental risks that are not being recognised, in the same way that the risks of some business practices before the financial crisis were not recognised? The BP Gulf of Mexico crisis is a high-profile example that illustrates the validity of this concern.

Across Europe the sustainable and responsible investment market now totals €5 trillion, which includes €1.2 trillion invested in core strategies like thematic investing using sustainability themes (for example, water, sustainable forestry). These figures represent growth of just under 90 percent in two years. In the US the most recent estimate is that one in nine dollars invested in financial markets specifically takes sustainable and responsible investment issues into account.

This market growth has led to a greater range of available solutions and products. There are sustainable and responsible options when it comes to investments, banking, ISAs, pensions, insurance and even mortgages. For example, there are now more than 90 green and ethical funds available in the UK. As well as having different financial characteristics, these funds address a range of issues – from opportunities to invest in businesses tackling today’s challenges, such as climate change and resource scarcity, to options for those wishing to avoid investing in certain industries or products.

As the UK and, indeed, the world face an increasing array of social and environmental challenges, sustainable and responsible investment and money management represent an opportunity to benefit financially from new opportunities in this area, while at the same time contributing towards finding solutions that will improve all of our lives, now and in the future.

Penny Shepherd MBE is Chief Executive of UKSIF, a membership network for sustainable and responsible financial services. www.uksif.org


Clare Brook, fund manager

It is hugely encouraging that over half of all British adults with investments want not only to make money but also to ‘make a difference’. The question is how they should go about it. One route is to invest in mainstream shares, taking care to ensure the fund manager is actively engaging with company management, encouraging them to be more responsible towards the environment, their employees and wider society.

Another way is to ensure the companies invested in are providing solutions to society’s most serious problems, rather than simply being part of the problem. The top 10 holdings of most ethical funds are a combination of banks, telecomm companies and supermarkets. Some also hold mining and oil companies, usually justified by claiming they are the ‘best in breed’ of these sectors. By investing instead in the growing ‘thematic’ sector, people can own investments in companies in the alternative energy, energy efficiency, recycling and water sectors, for example. Not only are these companies ‘making a difference’ but, in many cases, they offer exciting growth opportunities. No wonder this sector totals, as Penny says, €1.2 trillion and is growing rapidly. People are realising it’s a viable alternative to traditional ethical investing.

Clare Brook is fund manager of the IM WHEB Sustainability Fund. www.whebam.com


Huw Davies, banker

Penny’s quite right when she mentions the choices now available for being green or ethical with your finances.

While fair trade helps improve lives for producers in the developing world, and organic has environmental and possible health benefits, finance has a far wider impact – because it’s interconnected with all areas of the economy and life. Choosing ethical finance is one of the more powerful things you as a consumer can do.

In light of recent events, people are considering a change to their banking arrangements. Indeed, recent research conducted by Opinium shows that many people can’t find a single reason to recommend their current bank. And for 37 percent of those who won’t recommend, it comes down to their bank’s financial excesses in terms of hefty bonuses and excessive profits.

Sustainable and ethical banking aims to show customers that a bank can have a positive impact on society and the environment. Such financial institutions want people to take an interest, to become involved and to look more closely at how their savings are invested.

Triodos customers, for example, can rest assured that their money is actively doing good and not just avoiding harm. Triodos publishes details of every business it lends to.

Huw Davies is head of personal banking at Triodos Bank. www.triodos.com


Julian Parrott, financial adviser

Fundamentally, I agree with Penny. Interest in ethical and sustainable investment has grown significantly over the last 5 to 10 years. This reflects the growing awareness of environmental issues amongst the public and what might be called the ‘fair-trade effect’, where a previously niche product has emerged into the wider market and become more readily available. While an increase in investable environmental solutions has boosted the sustainability sectors, the recent banking crisis has also served to remind the public what happens to their money. It’s led to a growing interest in how savings are invested.

In the wider adviser community we have seen the ‘ethical question’ become increasingly important. Where advisers would once have shied away from asking clients about their concerns, these days, with the help of organisations like UKSIF and the EIA, which provide help and support with sector knowledge and engaging clients, they are finding such questions more and more relevant. The wide choice of available investment opportunities now means there are genuine financial planning options for clients at all stages of life, regardless of their financial objectives and whether they want to just dip their toe in the green water or dive right in.

Julian Parrott is a partner with Ethical Futures. www.ethicalfutures.co.uk


Matt Holt, investor

I don’t really think of any investment I make in terms of its being ‘most socially useful’ but I do look for the ‘least damaging’; investments that don’t seem actively to hurt anyone. I’m sure this will seem unduly cynical to some and painfully naive to others. Once I’ve ruled out any options where I can draw a clear and direct line to business areas I’m uncomfortable with, I’m pretty much left with funds that list themselves as ethical. On some level I hope that if enough people take this view it might have a wider effect on the investment market but, really, this is just about what I feel comfortable with as an individual.

The idea was to invest some money to put something aside for my kids (nine-month-old twins) so it would be a tad counter-productive if said funds are contributing towards buggering the world up. If I’m going to do that, I might as well spend the money now on a nice holiday for us all while there are still holidays to be had.

So I’ve opted for a slightly lower return on my money and a conscience that will let me sleep at night. Having said that given that the twins won’t let me sleep at night maybe they deserve to have my money invested in guns and pollution and stuff. (Joke.)

Matt Holt is a private investor.

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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