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3D Investing’s Fund Update

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scotland by Moyann Brenn via flickr

The fund universe has been very significantly expanded to £84.7 billion in assets under management, of which £50.3 billion relates to infrastructure funds. This is partly due to investment performance, but more to the addition of funds to the universe. The total universe now comprises 193, of which 24 are infrastructure funds. These are all registered for sale in the UK and have some form of ethical screening, or else have an environmental or social purpose.

Many of the additions are SICAVs run by European based managers and employ a ‘best of sector’ approach using Environmental and Social Governance data. There is a pattern of such funds investing in stocks that undermine our confidence in the way that sustainability criteria are applied. Yet, we have identified a number of additional funds that qualify for the 3D Portfolio and widen the range of options for socially motivated investors.

New Funds

Over 30 funds have been added to the 3D sustainable investment fund universe. There have been a few new launches, including two UK income funds. This is to be welcomed as there is a dearth of such funds, but the two funds, namely the Unicorn UK Ethical Income and Troy Trojan Ethical Income funds, are run on a negative screening basis and invest in companies with little clear positive social impact. Nevertheless, income is important for many investors and it is encouraging to see a widening in the choice available for investors.

Kames Capital has added a global fund to its ethical range and the evidence so far is encouraging (see below).

Perhaps controversially, we have added the Funding Circle Income Fund to our universe. This is an investment company that invests in loans to small and medium sized companies in the UK, US and Europe. There is no ethical screening but unlike the other listed P2P funds, this one makes no loans to consumers and helps to meet a crucial funding need in the wake of small businesses being unable to access bank finance. Most loans are made in the fields of property, manufacturing, retail and professional services.

We have also added a few infrastructure and property funds to the universe. These include two general property investments in the form of the Legal & General UK Property Fund and Real Estate Investment Trust, British Land. These are distinguished by their outstanding sustainability management and reporting.

As mentioned above, most of the fund additions relate to European managers including Allianz, BNP Paribas (Parvest), Mirova and Sarasin. Many of these funds are only directly available to professional or ‘sophisticated’ investors.The majority do not make it into the 3D Portfolio as there are better alternatives and the funds often include stocks that raise significant ethical concerns. This undermines our confidence in the ability of the manager to assess ethical issues and to meet the concerns of socially motivated investors. For example, Irish fund, the Davy Ethical Fund, invests in climate change denier and oil major, Exxon, and Amazon which uses very aggressive tax policies and stands accused of poor employment practice.

Risers & Fallers

Thirty funds have been upgraded on the basis of detailed analysis and a normalising of ratings. Six funds have seen their star ratings fall, largely due to a re-assessment of fund holdings and normalising funds to ensure consistency:

3d-investing-5-stars

No further funds have been awarded a five star rating. This is a premium rating that we reserve for the best so we are keen to preserve its status as a ‘best of the best’ ranking.

3d-investing-4-starsThe most notable fund to be awarded a four star rating for the first time is the AXA WF Planet Bond Fund. This is distinctive as it invests in Green bonds issued by large companies and international institutions, with the proceeds of the bonds being wholly used to fund positive environmental action. The fund has a very high environmental impact and a clear process for delivering change. It only fails to achieve a five star ranking because of a lack of impact reporting and a short financial track record.

Two BNP Paribas funds have also been awarded a four star rating. One is a water fund and the other an environmental fund, both run by Impax asset Management, with the environmental fund following a similar mandate to Impax’s own environmental funds. BNP Paribas’ exhibits a high level of transparency and understanding of sustainability issues.

The Pictet Environmental Megatrend Fund has been renamed and repurposed as the Pictet Global Environmental Opportunities Fund. This has led to a significant increase in the positive environmental impact of the fund and also wider suitability. We have therefore upgraded the fund to four stars.

Pattern Energy is the only infrastructure fund ever to be awarded a four star rating for the first time. This invests in 18 operational wind farms in the United States.

3d-investing-3-starsThere are now 61 funds out of a total of 169 non infrastructure funds that have a star rating of three or more. A three star rating therefore means that a fund is in the top 36% of all non-infrastructure funds in our sustainable universe.

We have been able to assess the Threadneedle Ethical UK Equity Fund which has the highest level of social impact of any UK Equity Fund. It’s still early days for the fund so we await further evidence of financial performance and of social impact reporting before being able to award a higher star rating, but this looks to be a promising fund.

The Kames Global Sustainability Fund largely lives up to its name with a decent ethical screen as well as making a positive environmental and social impact.

Other funds that have been awarded a three star ranking for the first time include a sustainable food fund from BNP Paribas (Parvest). This is run by Impax in a very similar manner to their own sustainable food fund. Other funds include environmental thematic funds offered by Mirova, VAM, Allianz and BNP Paribas. The clean energy funds have a high impact but are marked down in terms of overall star rating because of their poor and volatile absolute performance.

Despite a lack of direct environmental or social purpose, the Legal & General UK Property Fund and British Land gain a three star rating on the back of the excellence of their sustainability management and reporting. Similarly, the Sarasin Sustainable equity Real Estate Fund is awarded three stars because of the quality of the sustainability management evidenced by stock selection and its consistent financial track record.

3d-investing-2-starsThere have been many additions to the universe that have been awarded two stars. The two star ranking reflects our concerns over the quality of the sustainability management, highlighted by stocks in the portfolios that undermine our confidence in the application of sustainability principles. They also include funds that have a very limited positive social impact including the Troy Trojan Ethical Income and Unicorn UK Ethical Income funds.

3d-investing-1-starOne star funds either have a very poor track record or else invest in stocks that fundamentally undermine the sustainability theme. There are four newly added funds that we’ve awarded the lowest rating, but we would like to highlight one fund in particular – the BSF Impact World Equity Fund. To our mind this is a prime example of the misuse of the word ’impact’, which was originally used to describe investments that were made primarily for social impact. In this case, the fund invests in tobacco, mining, oil and agro chemicals, hardly investments that one would associate with sustainable investing.

3D Portfolio Universe

The 3D Portfolio has expanded to 43 funds, not including the infrastructure funds. This represents around 25% of the whole non infrastructure universe and is a selection of funds within different sectors that best meet our investment philosophy of doing good, minimising harm and delivering decent financial return.

The Sarasin Sustainable Equity Real Estate Fund has been added back following further research that shows above average sustainability for the vast majority of the holdings. We have also upgraded the Pictet Global Environmental opportunities Fund as described above and added it to the Portfolio on the basis of its much improved environmental impact and suitability.

The Funding Circle Income Fund has been added despite only being awarded two stars as it meets a real funding need as a core purpose. British Land and the Legal & General UK Property Fund have also made it on to the shortlist by virtue of their outstanding sustainability management. The Threadneedle Ethical UK Equity Fund is a welcome addition to a limited selection of UK equity funds, showing clear leadership in the sector in respect of financing companies with a positive social impact. One more fixed interest fund makes it on to the shortlist – the AXA WF Planet Bonds Fund – by virtue of its distinctive approach and high impact. This is a high quality bond fund with a correspondingly low yield.

The BNP Paribas Aqua Fund is very similar to other water funds run by Pictet and Sarasin and qualifies for the focus on water solutions, a decent financial performance and good sustainability management and reporting.

Finally, we have added the Mirova Europe Environmental Equity fund which exhibits a high social impact compared to other European equity funds.

By John Fleetwood, 3D Investing

This article first appeared in our latest Guide to Sustainable Investing

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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