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The Investors Chronicle’s masterclass in misleading ethical investment headlines

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In the spirit of media harmony that heralds National Ethical Investment Week, the Investors Chronicle chose to run an article headlined, Why investing in ‘good’ funds could ruin your returns. Simon Leadbetter addresses a spectacular case of ‘missing the point entirely’.

In a headline and first paragraph pairing that would put journalists at The Sun to shame, Katie Morley of the Investors Chronicle provides a masterclass in how to mislead a reader. The headline to this article rather depressingly reveals the prejudice of the writer before we even start. She compounds this by setting up straw men such as, “Would you risk investment returns on your hard-earned cash to make a small positive difference to the world of businesses?” The obvious answer to this question is, “No Katie, because I’m not an idiot.

She completes her first paragraph with a call to action against ‘good’ funds: “You should steer clear of ‘ethical’ funds, advisers are warning.” Reading the whole article, you will see that no, you shouldn’t and no, advisers don’t.

Morley then reveals her own confusion and states what to us is bleeding obvious: “Everyone’s concept of ‘ethical’ is different”. Yes it is. Of course it is, Katie. Global history rather points to that being a truism. However, the point of ethical investing is to ask the questions in the first place, both as an adviser and investor and allowing the investor to make an informed choice. If you hold a moral viewpoint or support a particular ethical cause, you might be bothered if the fund you had put money in invested in companies that actively work against your values.

Looking for a scandal that just is not there, Morley then expresses her concern that we might be surprised “to learn that the majority of ethical funds invest in major banks, as well as oil companies.” If you are surprised, then your IFA has not been doing their job properly. While she recognises these “industries have earned a distinctly ’immoral’ reputation in recent years”, she doesn’t seem to care that people would be surprised they are investing in them. Banks and oil companies are a reality. Reducing their share in a portfolio or fund can be a positive step to creating a more balanced approach.

Not letting her prejudice hide for one minute, she explains to us that, “More predictably, ethical funds do tend to exclude stocks with exposure to other ‘unethical’ industries such as fur, tobacco and alcohol.” Why is that wearily described as more predictable? Of course it is predictable, Katie. People with certain ethical views tend to object to killing animals for fashion, killing people in countries with poor public health or education programmes through promoting smoking and the less than savoury marketing techniques of the drinks industry.

She finds a friend in Jason Hollands, managing director of business development and communications at Bestinvest (note: business development means sales).

Hollands says, “During tough economic times, people still smoke and they still drink, meaning ‘unethical’ companies, despite damaging other people’s health, are defensive assets that will actually protect your portfolio. Ethical companies such as wind turbine and solar energy producers look the most flimsy during a recession, which is not very reassuring for private investors.”

OK, that’s alright then. So, if you’re dying of lung cancer, cyrohsis and maybe even campaign against smoking and excessive drinking, you shouldn’t let the little fact that your pension is invested in these companies bother you. Really Jason, really? “…despite damaging other people’s health.”  Does anyone else hear the terrible silence of a moral vacuum that impoverishes our society and capitalism more generally?

Morley adds a specific dire warning: “The approach ringing the most alarm bells is called ‘negative screening’, whereby ‘bad’ companies or entire sectors are banned from the fund’s portfolio. Everyone we spoke to said this exclusionary method could strangle your returns and send your investment risk through the roof by killing diversification. So if there’s anything to avoid like the plague, it’s funds deploying this strategy.”

No Katie, no. If you are genuinely concerned about the global issues caused by weapon proliferation, gambling, pornography, smoking, animal testing and alcohol abuse, you probably don’t want to invest in companies engaged in those activities. Colloquially they are known as the sin stocks. The line, “everyone we spoke to”, is a deeply misleading phrase akin to the pub favourite, “everyone knows”. One thing you can be certain of is that anyone who enlists ‘everyone’ to their cause is speaking only for themselves. From what we can see, she didn’t speak to anyone who was very informed on the issues involved.

She states that, “Negative screening is badmouthed even by ethical investment experts themselves.” Negative screening is obviously right for some with strongly held views, and is very rarely badmouthed by advisers who genuinely care about their clients’ concerns and values.  Sadly, many IFAs don’t care at all about their clients’ values and are more concerned about commissions and fees. This is despite the Financial Services Authority issuing guidelines on fact checks that advisers should take into account the beliefs and views of an investor.

Morley goes on to say that there is a better way (phew!) in the shape of positive screening, “whereby funds mangers pick the companies they believe are the most ethical”. That’s not quite right Katie, but we’ll let it pass.

This is backed by David Harris, manager of the FTSE4Good index and vice-chairman of the UK Sustainable Investment and Finance Association (UKSIF). Lost in several fact-free paragraphs that precede this, he actually points out that, “Investing with ethics in mind can reap rewards in the form of returns, claiming all but one of the environmental FTSE indices has outperformed equivalent ‘non-ethical’ indices.”

Hold on. “All but one of the environmental FTSE indices has outperformed equivalent ‘non-ethical’ indices”. Let’s refer back to the article’s headline: “Why investing in ‘good’ funds could ruin your returns”.  How do these two points tally? They don’t, basically.

Morley concludes that, “Off-the record, advice from most of the advisers we spoke to goes as follows: If you care about a cause enough that you would stake your money on it, positively screened ethical funds are worth a look. But if you want to keep your nest egg safe, giving to charity or buying ethical products – such as fair trade coffee – will put your money to just as good use, without the risk.”

Unable to put anyone on the record (despite the gratuitous use of ‘everyone’ and ‘most’) and allowing her own prejudice to cloud her judgment, she presents the contradictory view that we should give to charity, ignoring the fact that companies we invest in may be directly undermining the work of the charity we support. Katie, charitable giving in the UK was £11 billion in 2010/2011 (NVCO/CAF) and assets under management was £4.2 trillion (IMA). Charity isn’t going to address the issues created by what we invest in. For every pound of charitable giving, £382 is assets under management.

As for, “Buying ethical products – such as fair-trade coffee”, according to the Co-operative, the size of the ethical goods and services  market in the UK is £47 billion, with fair trade representing £1 billion. All minnows compared to the £4.2 trillion assets under management.

This is a fundamentally flawed, fact-free and misinformed opinion piece masquerading as journalism. We really would expect better from the Investors Chronicle. A better headline would be “Why investing in ‘unsustainable’ funds could ruin your planet and your children’s future.” However, we are not entirely sure Morley has done her research, knows enough about the subject, or can even hide her prejudices enough to write that particular article. Must try harder, Katie.

National Ethical Investment Week runs until Saturday, October 20. Join the movement on Twitter using the hashtag #NEIW12.

Further reading:

Ethical investment demand rises as individuals turn to sustainability

National Ethical Investment Week 2012 begins

Financial advisers targeted for National Ethical Investment Week

National Ethical Investment Week calls on religious groups to take action

Simon Leadbetter is the founder and publisher of Blue & Green Tomorrow. He has held senior roles at Northcliffe, The Daily Telegraph, Santander, Barclaycard, AXA, Prudential and Fidelity. In 2004, he founded a marketing agency that worked amongst others with The Guardian, Vodafone, E.On and Liverpool Victoria. He sold this agency in 2006 and as Chief Marketing Officer for two VC-backed start-ups launched the online platform Cleantech Intelligence (which underpinned the The Guardian’s Cleantech 100) and StrategyEye Cleantech. Most recently, he was Marketing Director of Emap, the UK’s largest B2B publisher, and the founder of Blue & Green Communications Limited.

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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