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Drop in ethical fund sales part of a ‘general decline’

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An article by City AM yesterday said how ethical funds had witnessed the “highest drop in retail sales on record”. But according to a leading responsible investment research firm, the figures quoted in the piece fail to address the whole picture.

The article claims that after reaping in £46m in the third quarter (Q3) of last year, ethical funds saw a £33m discharge in net retail sales in the same period in 2012 – the biggest decrease since 1992.

But EIRIS, one of the UK’s foremost independent providers of ethical performance research, found that the statistics from the Investment Management Association were by no means exclusive to the ethical, responsible and sustainable fund sector.

What the City AM article only briefly mentions is that general net retail sales for UK funds also declined in Q3 of 2012 by -53% from Q2 2012 and by -30% from Q3 2011”, said head of communications Mark Robertson, who is also editor of YourEthicalMoney.org.

“So the reduction in sales of ethical funds is likely a reflection of a general decline in net retail sales for UK funds which is occurring across the board.”

Julian Parrott, partner at Edinburgh-based financial advisers Ethical Futures, said his firm had placed £1.5m into ethical funds in the past quarter, with a net inflow of around £1.43m.

He added that ethical investors might have taken to investing their money in alternative sustainable investments, including domestic renewable energy and low-carbon transport.

September is new registrations for cars and even ethical investors replace their car sometimes”, Parrott explained.

“I note that this September’s car sales were at their highest for quite some time, and that low-carbon emission and electric cars were amongst the biggest increases in sales.

Quite a lot of clients have invested in domestic solar power this year due to feed-in tariff incentives; this is seen as offering a genuinely green and ethical option with a more reliable return that building society or some investments.”

Robertson also addressed a comment made by Mark Dampier of Hargreaves Lansdown, who was quoted in the City AM article as saying, “The problem with ethical funds is you’re asking a fund manager to run a fund with one hand behind his back.”

Robertson said, “Dampier is expressing a rather dated view of the ethical investment market.

The extent to which ethical funds are constrained by their ethical policy varies from fund to fund. The tendency is towards positive investment policies which seek to reduce risk and maximise investment opportunities by seeking out those companies that have the best performance on environmental, social and governance (ESG) issues or engaging with them to improve performance, rather than screening heavily on negative issues.

You only have to look at corporate social responsibility failures at BP, News Corporation, Vedanta and Olympus to understand the advantages in engaging with companies to reduce risk by improving their ethical performance.”

Parrott, too, questioned Dampier’s remarks, saying that the Hargreaves Lansdown researcher simply “doesn’t get” the ethical fund market.

It’s a funds issue; not an ethical funds issue”, Parrott claimed.

I’ve read [Dampier’s] comments before – he is consistent as he just sees performance and percentage returns and doesn’t seem to understand issues of values. He sees limitations on investing in cancer-inducing tobacco or environment-destroying deforestation or mining as a constraint, whereas I see it as an outrage.

I think that ethical fund managers should not rest on their laurels. We need to maintain standards and open up new investment opportunities for clients who wish to support truly ethical and sustainable investment opportunities.”

Studies earlier this year by German rating agency Oekom and the now-defunct DB Climate Change Advisors, Deutsche Bank’s climate change research arm, are just two of a number of investigations into the performance of ethical funds that dispel some of the popular myths surrounding the sector.

In the latter, Mark Fulton, global head of climate change investment research at Deutsche Bank, said, “The evidence is compelling. Sustainable investing can be a clear win for investors and for companies.”

On performance, Robertson of EIRIS said, “Ethical funds are just like any other category of retail fund in that there are both good and bad performing funds out here.

However, ethical funds can also perform better than their non-ethical peers, as evidenced by the Amity International Fund, an ethically-screened fund managed by Ecclesiastical, which is in the top quartile of the UK All Companies sector over three years.

In the five years to September 2012 the fund returned 16.2% against the sector average of 13.04%.”

Blue & Green Tomorrow’s recent Guide to Sustainable Investment which was written and published as part of National Ethical Investment Week last month, explores the notion of ethical investing in more detail, through interviews with some of the sector’s leading lights.

Further reading:

Investing sustainably is a ‘clear win’ says study

Analysis shows the ‘superior performance’ of sustainable investment

Investments in resource-efficient firms shown to outperform competition

The Investors Chronicle’s masterclass in misleading ethical investment headlines

The growing appetite for green and ethical investment

The Guide to Sustainable Investment (NEIW edition)

Economy

Will Self-Driving Cars Be Better for the Environment?

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self-driving cars for green environment
Shutterstock Licensed Photo - By Zapp2Photo | https://www.shutterstock.com/g/zapp2photo

Technologists, engineers, lawmakers, and the general public have been excitedly debating about the merits of self-driving cars for the past several years, as companies like Waymo and Uber race to get the first fully autonomous vehicles on the market. Largely, the concerns have been about safety and ethics; is a self-driving car really capable of eliminating the human errors responsible for the majority of vehicular accidents? And if so, who’s responsible for programming life-or-death decisions, and who’s held liable in the event of an accident?

But while these questions continue being debated, protecting people on an individual level, it’s worth posing a different question: how will self-driving cars impact the environment?

The Big Picture

The Department of Energy attempted to answer this question in clear terms, using scientific research and existing data sets to project the short-term and long-term environmental impact that self-driving vehicles could have. Its findings? The emergence of self-driving vehicles could essentially go either way; it could reduce energy consumption in transportation by as much as 90 percent, or increase it by more than 200 percent.

That’s a margin of error so wide it might as well be a total guess, but there are too many unknown variables to form a solid conclusion. There are many ways autonomous vehicles could influence our energy consumption and environmental impact, and they could go well or poorly, depending on how they’re adopted.

Driver Reduction?

One of the big selling points of autonomous vehicles is their capacity to reduce the total number of vehicles—and human drivers—on the road. If you’re able to carpool to work in a self-driving vehicle, or rely on autonomous public transportation, you’ll spend far less time, money, and energy on your own car. The convenience and efficiency of autonomous vehicles would therefore reduce the total miles driven, and significantly reduce carbon emissions.

There’s a flip side to this argument, however. If autonomous vehicles are far more convenient and less expensive than previous means of travel, it could be an incentive for people to travel more frequently, or drive to more destinations they’d otherwise avoid. In this case, the total miles driven could actually increase with the rise of self-driving cars.

As an added consideration, the increase or decrease in drivers on the road could result in more or fewer vehicle collisions, respectively—especially in the early days of autonomous vehicle adoption, when so many human drivers are still on the road. Car accident injury cases, therefore, would become far more complicated, and the roads could be temporarily less safe.

Deadheading

Deadheading is a term used in trucking and ridesharing to refer to miles driven with an empty load. Assume for a moment that there’s a fleet of self-driving vehicles available to pick people up and carry them to their destinations. It’s a convenient service, but by necessity, these vehicles will spend at least some of their time driving without passengers, whether it’s spent waiting to pick someone up or en route to their location. The increase in miles from deadheading could nullify the potential benefits of people driving fewer total miles, or add to the damage done by their increased mileage.

Make and Model of Car

Much will also depend on the types of cars equipped to be self-driving. For example, Waymo recently launched a wave of self-driving hybrid minivans, capable of getting far better mileage than a gas-only vehicle. If the majority of self-driving cars are electric or hybrids, the environmental impact will be much lower than if they’re converted from existing vehicles. Good emissions ratings are also important here.

On the other hand, the increased demand for autonomous vehicles could put more pressure on factory production, and make older cars obsolete. In that case, the gas mileage savings could be counteracted by the increased environmental impact of factory production.

The Bottom Line

Right now, there are too many unanswered questions to make a confident determination whether self-driving vehicles will help or harm the environment. Will we start driving more, or less? How will they handle dead time? What kind of models are going to be on the road?

Engineers and the general public are in complete control of how this develops in the near future. Hopefully, we’ll be able to see all the safety benefits of having autonomous vehicles on the road, but without any of the extra environmental impact to deal with.

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Economy

New Zealand to Switch to Fully Renewable Energy by 2035

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renewable energy policy
Shutterstock Licensed Photo - By Eviart / https://www.shutterstock.com/g/adrian825

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.

Sources: https://www.bloomberg.com/news/articles/2017-11-06/green-dream-risks-energy-security-as-kiwis-aim-for-zero-carbon

https://www.reuters.com/article/us-france-hydrocarbons/france-plans-to-end-oil-and-gas-production-by-2040-idUSKCN1BH1AQ

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