Simon Leadbetter takes a look at what motivates tens of thousands of people to invest sustainably.
In October 2011, nearly 38% of people said they were interested in investing ethically (EIRIS, 2011). Before that in December 2010, The Financial Times noted that, “record numbers of individuals are investing with a conscience”. Back in September 2010, EUROSIF predicted that by 2013 the share of high net worth individuals’ portfolios in ethical investments would have increased to 15%, just below the €1.2 trillion mark. Maybe it’s time to take a closer look at sustainable investment.
But what is sustainable investing?
One of the biggest issues facing this growing industry is misunderstanding of what it is.
So what is sustainable investment? Often called ethical investment, socially responsible or green investment, sustainable investments look at the need to balance the economic, social and environmental effects of the companies they invest in. Sustainable investors look to invest in those companies that ensure the continuing viability of our environment and society, while still delivering for them the income they need; those with a good record on what is also known as the triple bottom line (economic, social and environmental), the three Ps (profit, people and planet) or ESG (environmental, social and governance).
Born in the 18th Century, sustainable investing “began mostly with religious groups in the UK and the United States who were concerned with investing and making money based on moral principles supported by their religious and moral beliefs. ‘Morally deviant’ investment practices at the time were exemplified by profitable endeavours such as the slave trade that ethical investors sought to avoid” (B> 2010).
Sustainable investors stand along a spectrum from dark green to light green. The darker green you are, the more likely you are to only invest in those companies that behave sustainably. The lighter green you are, the more likely you are to simply avoid those companies that behave the least sustainably. These positions respectively deploy positive screening (dark greens seek out sustainable companies) and negative screening (light greens screen out unsustainable companies).
So where are you on that spectrum? If you only want to invest in those companies that are sustainable, you are limiting your choice of companies to a select but excellent few. As a result you may experience a rougher investment ride, as you cannot spread the risk more widely. That said you will also sleep with a clean conscience and would probably be backing the global business leaders of the future and making the planet a better place for everyone. You may be backing the future Google or Apple of sustainability. If you would prefer to simply avoid companies who are involved in activities you disagree with you are a lighter shade of green. This carries less risk but does mean the occasional unsavoury company may squeak through the screening process.
There are clear trade-offs. What might be ethical, such as global trade that benefits the developing world, might not be environmentally friendly and vice versa. If we fly there to visit them, or fly or ship their produce back to us we create wealth for them, but cause pollution.
Critically your environmental and ethical perspectives are unique to you, as are your financial needs and expectations; what is acceptable or unacceptable to someone else may not be to you.
The three wise monkeys of investing
If the first challenge of sustainable investing is misunderstanding, then the second challenge is the three wise monkeys of investing: The see no evil, hear no evil and speak no evil approach. Most private investors we speak to, while thoroughly ethical people in the daily lives, would just prefer not to hear anything about where their investments are heading, be that building bombs, funding pornography, supporting cosmetic testing on animals or building businesses that use child labour in far off lands. Apathy and ignorance aren’t crimes but their effects can be criminal.
It’s fair to say that the financial services industry does its best to make financial products as incomprehensible and mind-numbingly dull as possible, so investors shouldn’t feel they need to take all the responsibility.
Imagine I gave you £1,000
If you put £1,000 into a straightforward FTSE100 tracker fund, £108 will go into the shares of tobacco companies; a further £196 will go into Oil & Gas companies; £145 will back basic materials (mining and refining of metals, chemical producers and forestry products); of the remaining £551, the big utility companies, who keep sending those blood-chilling quarterly bills, get £41 from you (FTSE, June 1011).
Undoubtedly, smoking, digging, drilling and burning fossil fuels are very profitable industries. Our old economy and pension funds depended on them.
On the other hand one in 10 adults in the world die from smoking related diseases each year (WHO, 2010). As public health campaigns and smoking bans in the developed world force down the numbers of smokers here, companies seek out new markets in the developing world, particularly in Asia and Africa (Tobacco Atlas, 2010). Whatever your perspective there’s something unpleasant about a highly profitable developed world company exploiting a lack of understanding to peddle cancer for more profit.
Burning fossil fuels (in power plants, planes, trains and automobiles) creates air pollution which causes headaches, fatigue, respiratory illnesses, cardio-vascular problems, gastroenteritis, cancer, nausea and skin irritation, ignoring for one moment its generous contribution to climate change. According to a 2010 Parliamentary Environmental Audit Committee report air pollution causes 50,000 early deaths in the UK. It also costs the UK over £3.5bn according to the European Environment Agency or the equivalent of 195,000 nurses (the NHS employs 300,000 nurses in England).
This is all very well I hear you say but “I need a return on investment“. To which the sustainable investor replies, “At what cost?“.
Is it worth it if that return on investment means we have to fight wars for oil in the Middle East? (£12.50 of your hypothetical £1,000 goes to BAE systems – a manufacturer of weapons known euphemistically as defence systems) Is it worth it if we use high pressured water systems to fracture our land (fracking) to release shale gas, causing earth tremors and increasing our carbon emissions? Is it worth it if that return on investment means your children are more likely to suffer from respiratory disease? Is it worth it if they’re exposed to pornography from a young age? Do we care? Should we?
This does not mean being a puritan or going back to the Stone Age economically. If you smoke or drink that’s up to you but remember every pound you spend with these companies and every pound you may inadvertently invest in them is being used very deliberately to recruit the next generation of smokers and drinkers. The businesses involved have made the brutal calculation that you’ll be dead soon enough and you need to be replaced to keep shareholders happy.
More importantly, every pound invested in fossil fuels is a pound not spent on renewable energy. As we reported in November a 2010 independent report on offshore wind potential, Offshore Valuation, described the North Sea’s potential to be the ‘Saudi Arabia of renewable energy’. For the United Kingdom to sit on the shoreline of this massive and unending source of clean, natural energy and do little about it is economic, strategic and energy security madness. With investment in renewable energy overtaking fossil fuels and another North Sea nation declaring itself ready to go 100% renewable, now might be a time to look at your portfolio and see whom you are investing in.
There are some that argue that renewable energy is too expensive and the power too intermittent. But prices have been falling for the last twenty years and will continue to fall (Seeking Alpha 2010).
The author of a recent Bloomberg New Energy Finance report, Justin Wu, said, “The public perception of wind power tends to be that it is environmentally-friendly, but expensive and intermittent. That is out-of-date in the best locations, where generation is already cost-competitive with fossil fuel electricity, and that will be the case for the majority of new onshore turbines installed worldwide by 2016.
“The press is reacting to the recent price drops in solar equipment as though they are the result of temporary oversupply or of a trade war. This masks what is really going on: a long-term, consistent drop in clean energy technology costs, resulting from decades of hard work by tens of thousands of researchers, engineers, technicians and people in operations and procurement. And it is not going to stop: In the next few years the mainstream world is going to wake up to wind cheaper than gas and rooftop solar power cheaper than daytime electricity.”
The third and final challenge is getting good quality independent advice
Many readers tell us that they’ve floated the idea of investing sustainably, responsibly or ethically only for their financial adviser or wealth manager to roll his or her eyes, purse their lips and make a sharp remark something akin to, “well, if you want give up financial security and return on investment, then that’s up to you”.
This is a remarkably ill-informed perspective. Firstly, the adviser should be independent and it is not their role to ignore any moral or ethical concerns you may have. As we’ve said above, dark green funds that only invest in sustainable companies can be more volatile, but there are 90 funds to choose from. The majority of these use negative screening so as to balance stability and profitability with sustainability.
Secondly, the performance of some sustainable funds has been remarkable over the last few years. In February 2011, Mark Smith of Trustnet reported that, “Four out of the five ethical bond funds in the IMA Sterling Bond sector outperformed the sector average over the last year, with Rathbone Ethical Bond returning more to investors than any other corporate bond fund over a six-month period”.
In summary, it’s about being true to your values and securing the value of your investments
Just as no-one expects you be a saint in your lifestyle choices, nor does anyone but the darkest green expect you to be a saint in your investment choices. Simply exploring the options is the first step. Reading Blue & Green Tomorrow will give you different perspectives from various ethical financial advisers and fund managers. Yourethicalmoney.org provides a wealth of information and if you type ‘ethical investment’ into Google or Bing you’ll be surprised at the wealth of resources available.
You are more powerful than ever as a voter, consumer and shareholder and you can make a difference.
If you decide to take another step, talk to your financial adviser is you have one. If they sniff at the very idea of sustainable investment ask yourself whose interests they really have at heart. If they cannot be bothered to research the funds that meet your financial and moral needs why should they deserve your trust and money in the form of fees or commission? Alternatively, we have a panel of ethical financial advisers who can help you make the right decisions for your wallet and your conscience. Simply complete our online form and we’ll put you in contact with someone who can guide you.
How to Build An Eco-Friendly Home Pool
Swimming pools are undoubtedly one of the most luxurious features that any home can have. But environmentally-conscious homeowners who are interested in having a pool installed may feel that the potential issues surrounding wasted water, chemical use and energy utilized in heating the water makes having a home swimming pool difficult to justify.
But there is good news, because modern technologies are helping to make pools far less environmentally harmful than ever before. If you are interested in having a pool built but you want to make sure that it is as eco-friendly as possible, you can follow the advice below. From natural pools to solar panel heating systems, there are many steps that you can take.
Choose a natural pool to go chemical free
For those homeowners interested in an eco-friendly pool, the first thing to consider is a natural pool. Natural swimming pools utilise reed bed technology or moss-filtration to naturally filter out dirt from the water. These can be combined with eco-pumps to allow you to have a pool that is completely free from chemicals.
Not only are traditional pool chemicals potentially harmful to the skin, they also mean that you can contaminate the area around the pool if chemical-filled water leaks or is splashed around. This can be bad for your garden and the environment general.
It will be necessary to work with an expert pool builder to ensure that you have the expertise to get your natural pool installed properly. But the results with definitely be worth the effort and planning that you have to put in.
Avoid concrete if possible
The vast majority of home pools are built using concrete but this is far from ideal in terms of an eco-friendly pool for a large number of reasons. Concrete pools are typically built and then lined to stop keep out any bacteria. This is theoretically fine, except that concrete is porous and the lining can be liable to erode or break which can allow bacteria to enter the pool.
It is much better to use a non-porous material such as fibreglass or carbon ceramic composite for your pool. Typically, these swimming pools are supplied in a one-piece shell rather than having to be built from scratch, ensuring a bacteria-free environment. These non-porous materials make it impossible for the water to become contaminated through bacteria seeping into the pool by osmosis.
The further problem that can arise from having a concrete pool is that once this bacteria begins to get into the pool it can be more difficult for a natural filtration system to be effective. This can lead to you having to resort to using chemicals to get the pool clean.
Add solar panels
It is surprising how many will go to extreme lengths to ensure that their pool is as eco-friendly as possible in terms of building and maintaining it but then fall down on something extremely obvious. No matter what steps you take with the rest of your pool, it won’t really be worth the hassle if you are going to be conventionally heating your pool up, using serious amounts of energy to do so.
Thankfully there are plenty of steps you can take to ensure that your pool is heated to a pleasant temperature while causing minimal damage to the environment. Firstly, gathering energy using solar panels has become a very popular way to reduce consumption of electricity as well as decreasing utility bills. Many businesses offer solar panels specifically for swimming pools.
Additionally, installing an energy efficient heat pump or boiler to work in conjunction with your solar panels can be hugely beneficial.
Finally, it is worth remembering that there are many benefits to investing in a pool cover. When you cover your pool you increase its heat retention which stops you from having to power a pump or boiler to keep it warm. This works in conjunction with the solar panels and eco-friendly heating system that you have already had installed.
Additionally, you cover helps to keep out dirt and other detritus that can enter the pool, bringing in bacteria. Anything that you can do to keep bacteria out will be helpful in terms of keeping it clean.
4 Ways To Get a Green House in 2018
Demand for green houses is surging. In 2020, almost 20% of all homes on the market will be green.
If you would like to buy a green home, this is a great time to look into it. Prices are still pretty low and there are a lot more financing options available than there were right after the recession.
If you’re thinking about buying a house, now could be a very good time to make the move! A number of factors in the housing market right now mean that you might be able to afford your dream home. Although in many parts of the country house prices are still rising, if you do your research and plan wisely, there are lots of good schemes to help you get your foot on the property ladder, or trade up to the house you’ve always wanted.
Interest Rates and Stamp Duty
Although the Bank of England raised interest rates by 0.25% recently, they remain very low, which is good news if you’re thinking of taking out a mortgage. However, rates may not stay low and it’s predicted that there’ll be a further rate rise during 2018, so don’t wait too long. Another factor that’s going to help first time buyers in particular is the Chancellor’s decision to abolish stamp duty for first timers purchasing properties for under £300,000.
For many people looking to buy a green home, raising a deposit of between 5% and 20% may not be a realistic option, in which case there are a growing number of schemes to help. Increasingly popular are shared ownership schemes, through which the buyer pays a percentage of the full value of the property (typically between 25% and 75%) and the local council or a housing association pays the rest, and takes part ownership. This is suitable for buyers who may struggle to meet the up-front costs of buying outright. There will often be a service charge or management fees to pay in addition to the mortgage. The Government’s Help To Buy scheme is a good place to start looking if you’re interested in this option. This scheme is now available to people looking to buy green homes too.
If you’re still saving for a deposit, another scheme is the Help to Buy ISA. You can get a 25% boost to your savings on amounts up to £200 per month with this scheme. It’s only open to first time buyers and you can claim a maximum of £3000.
Green home buyers are going to run into a number of other ancillary costs, most of which are common to other homebuyers.
When calculating how much you can afford, it’s vitally important to remember that buying a house comes with a whole host of other costs. Depending on the cost of the property that you’re buying, you may have to pay stamp duty of anywhere between 1% and 5%. There’ll be estate agents fee if you’re also selling a property, although there are a wide range of online estate agents operating such as Purple Bricks or Right Move that have lower fees than traditional high street companies. Conveyancing costs to a solicitor can add another £1000-£3000 and you may need to take out life insurance and hire a moving firm.
There are other initial costs such as, fixing parts of the home that aren’t upto your taste. Getting new furniture to fill up all the new-found space in your new home. If you are moving away from the city, you need to consider the cost of transportation as well, as it can take up quite a lot over time. Take your time, do your homework and shop around and soon you could be getting the keys to your perfect home.
I hope this article was useful for you to learn more about the basics that you need to be aware of before you start the process of buying your first home. If you have any doubts with regards to this, let us know through the comments and we will be glad to help you out. If you have any suggestions regarding how we can improve the article, let us know them through the comments as well for us to improve.
Do you have any other reservations against buying your first home? Do you see your house as an asset or a liability? Do you think it is important for everyone to get themselves a new home? Let us know through the comments.