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3D five star fund Triodos Sustainable Pioneer: the 3D Investing perspective

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During Good Money Week Blue & Green Tomorrow launched 3D Investing’s 5-Star rating system which allows advisers and investors to pick out the best of the best from the socially responsible investment universe. To find out more read the B&GT Guide to Sustainable Investment or visit 3Dinvesting.com. Today we take a look at the Triodos Sustainable Pioneer Fund.

Triodos is known as a real pioneer in sustainable investing, chiefly through its banking operations. This fund invests in small and medium sized companies that fall into one of four themes – sustainable energy, medical technology, environmental technology and corporate social responsibility pioneers. The quality of the social research, transparency of communications and the ethos of the fund are second to none.

Although the fund is a relatively recent launch in the UK, it has been available in the Netherlands since 2007. Since launch in the UK, performance relative to its benchmark has been average, although over the longer term, the original share class has underperformed the composite index. We have a very high level of confidence in Triodos and the fund provides exposure to smaller/mid cap global companies in four key areas. The quality of the research, level of transparency and thematic approach, combined with a decent fund management team make this a five star fund.

Investment Strategy & Fund Composition

This is a smaller companies fund, wholly focused on four themes. The first of these is healthy people which includes companies offering solutions for health care issues, such as medical technology, drugs aimed at curing diseases in developing countries, clean drinking water and innovative health care. Other relevant activities include medicines based on natural ingredients and organic food production.

The clean planet theme embraces environmental technologies aimed at combating pollution and cleaning up the earth including companies that specialize in recording environmental pollution and energy consumption. The climate protection theme covers clean energy, energy efficiency and LED lighting, whilst the CSR pioneer theme largely relates to packaging companies (that use a high recycled content) and organic food retailers.

Two thirds of the fund is invested in North America with the majority of the remainder in Europe.

Ethical Approach & Suitability

Minimum ethical standards are applied to the fund, and in particular, coal, nuclear energy, unconventional gas and oil, and components of weapons are avoided. However, the wholesale focus on the four social and environmental themes (see below) is what distinguishes the fund. Each holding has to derive at least 50% of its revenues from one of the prescribed activities. There are no contentious holdings and the fund is likely to prove ethically desirable for the vast majority of investors.

Sustainability analyses are also used to enter into a dialogue with companies. In order to stimulate companies to improve their sustainability performance, Triodos Sustainability Research uses this dialogue to raise awareness, convince others and to motivate change.

The fund has no contentious holdings.

SRI Capability & Management

Triodos is known for its ethical banking operations in Western Europe but it has been developing its investment management offering to include listed equity investments since the early 1990s. The fund is offered by Triodos Bank direct to its retail customers and is advised by Triodos Investment Management, a wholly owned subsidiary of the bank that is now responsible for €2.6 billion in assets under management. It is one of the leading exponents of sustainable, thematic investing, with a wealth of expertise and resources at its command. Triodos constructs the investment universe from which its chosen fund manager selects stocks and is particularly rigorous in assessing companies and understanding the concerns of investors. The level of transparency is exceptionally high with all stocks being profiled, and not only those held, but also each potential investment in the investment universe. Furthermore, the engagement activity is fully documented by way of engagement and proxy voting reports and these are not just confined to corporate governance, but look at other wide ranging ethical issues.

Social Impact

All of the fund is invested in companies that have a direct social or environmental benefit giving it the highest rating. All of the underlying investments represent the purchase of shares in quoted companies and capital is not, by and large, directly enabling new social or environmental initiatives. However, the fund does finance some smaller innovative companies and capital invested does continue to finance socially beneficial companies. Key social impacts are in line with the themes of the fund, that is, healthier people, climate protection and a cleaner planet.

Risk Management

The fund is well diversified with more than 60 holdings. The average market capitalisation is lower than comparable funds, which would generally indicate a higher level of risk, and this is borne out by a level of volatility that is a little higher than other global thematic funds. Investments are held in local currencies and this risk is unhedged.

Transparency

Triodos is exemplary in the level of transparency and communication of its engagement and investment strategies. The reasoning for inclusion of each holding is made publicly available, as are the results of any sustainability analyses and dialogue with companies. Triodos actively seeks to improve the sustainability performance of its holdings through active dialogue and it benchmarks company performance on a range of sustainability issues to identify areas of strength and weakness. Triodos then aims to convince investee companies of the need for change and will work with them to achieve this.

Financial Performance & Management

The fund is managed by Delta Lloyd, a boutique fund manager in the Netherlands. Delta Lloyd adopts a distinctive style, generally investing in 25-35 companies in which it holds substantial positions and has a close relationship.
The objective is to invest in shares which the manager considers to be worth 30 – 50% more than the current market capitalisation, giving them a valuation safety margin. In the case of the Triodos Fund, more stocks are held to reduce stock specific risk. The fund is measured against a composite benchmark comprising clean energy, environmental, healthcare and small company indices. Sterling share classes were only established in the UK in April 2013, but the fund has a track record going back to 2007, since when the fund has performed largely in line with the composite benchmark.

In accordance with the Financial Services and Markets Act 2000, Blue and Green Communications Limited does not provide regulated investment services of any kind, and is not authorised to do so. Nothing in this magazine and all parts herein constitutes or should be deemed to constitute advice, recommendation, invitation or inducement to buy, sell, subscribe for or underwrite any investment of any kind. Any specific investment-related queries or concerns should be directed to a fully qualified financial adviser.

Editors Choice

2017 Was the Most Expensive Year Ever for U.S. Natural Disaster Damage

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Natural Disaster Damage
Shutterstock / By Droidworker | https://www.shutterstock.com/g/droidworker

Devastating natural disasters dominated last year’s headlines and made many wonder how the affected areas could ever recover. According to data from the U.S. National Oceanic and Atmospheric Administration (NOAA), the storms and other weather events that caused the destruction were extremely costly.

Specifically, the natural disasters recorded last year caused so much damage that the associated losses made 2017 the most expensive year on record in the 38-year history of keeping such data. The following are several reasons that 2017 made headlines for this notorious distinction.

Over a Dozen Events With Losses Totalling More Than $1 Billion Each

The NOAA reports that in total, the recorded losses equaled $306 billion, which is $90 billion more than the amount associated with 2005, the previous record holder. One of the primary reasons the dollar amount climbed so high last year is that 16 individual events cost more than $1 billion each.

Global Warming Contributed to Hurricane Harvey

Hurricane Harvey, one of two Category-4 hurricanes that made landfall in 2017, was a particularly expensive natural disaster. Nearly 800,000 people needed assistance after the storm. Hurricane Harvey alone cost $125 billion, with some estimates even higher than that. So far, the only hurricane more expensive than Harvey was Katrina.

Before Hurricane Harvey hit, scientists speculated climate change could make it worse. They discussed how rising ocean temperatures make hurricanes more intense, and warmer atmospheres have higher amounts of water vapor, causing larger rainfall totals.

Since then, a new study published in “Environmental Research Letters” confirmed climate change was indeed a factor that gave Hurricane Harvey more power. It found environmental conditions associated with global warming made the storm more severe and increase the likelihood of similar events.

That same study also compared today’s storms with ones from 1900. It found that compared to those earlier weather phenomena, Hurricane Harvey’s rainfall was 15 percent more intense and three times as likely to happen now versus in 1900.

Warming oceans are one of the contributing factors. Specifically, the ocean’s surface temperature associated with the region where Hurricane Harvey quickly transformed from a tropical storm into a Category 4 hurricane has become about 1 degree Fahrenheit warmer over the past few decades.

Michael Mann, a climatologist from Penn State University, believes that due to a relationship known as the Clausius-Clapeyron equation, there was about 3-5 percent more moisture in the air, which caused more rain. To complicate matters even more, global warming made sea levels rise by more than 6 inches in the Houston area over the past few decades. Mann also believes global warming caused the stationery summer weather patterns that made Hurricane Harvey stop moving and saturate the area with rain. Mann clarifies although global warming didn’t cause Hurricane Harvey as a whole, it exacerbated several factors of the storm.

Also, statistics collected by the Environmental Protection Agency (EPA) from 1901-2015 found the precipitation levels in the contiguous 48 states had gone up by 0.17 inches per decade. The EPA notes the increase is expected because rainfall totals tend to go up as the Earth’s surface temperatures rise and additional evaporation occurs.

The EPA’s measurements about surface temperature indicate for the same timespan mentioned above for precipitation, the temperatures have gotten 0.14 Fahrenheit hotter per decade. Also, although the global surface temperature went up by 0.15 Fahrenheit during the same period, the temperature rise has been faster in the United States compared to the rest of the world since the 1970s.

Severe Storms Cause a Loss of Productivity

Many people don’t immediately think of one important factor when discussing the aftermath of natural disasters: the adverse impact on productivity. Businesses and members of the workforce in Houston, Miami and other cities hit by Hurricanes Harvey and Irma suffered losses that may total between $150-200 billion when both damage and sacrificed productivity are accounted for, according to estimates from Moody’s Analytics.

Some workers who decide to leave their homes before storms arrive delay returning after the immediate danger has passed. As a result of their absences, a labor-force shortage may occur. News sources posted stories highlighting that the Houston area might not have enough construction workers to handle necessary rebuilding efforts after Hurricane Harvey.

It’s not hard to imagine the impact heavy storms could have on business operations. However, companies that offer goods to help people prepare for hurricanes and similar disasters often find the market wants what they provide. While watching the paths of current storms, people tend to recall storms that took place years ago and see them as reminders to get prepared for what could happen.

Longer and More Disastrous Wildfires Require More Resources to Fight

The wildfires that ripped through millions of acres in the western region of the United States this year also made substantial contributions to the 2017 disaster-related expenses. The U.S. Forest Service, which is within the U.S. Department of Agriculture, reported 2017 as its costliest year ever and saw total expenditures exceeding $2 billion.

The agency anticipates the costs will grow, especially when they take past data into account. In 1995, the U.S. Forest Service spent 16 percent of its annual budget for wildfire-fighting costs, but in 2015, the amount ballooned to 52 percent. The sheer number of wildfires last year didn’t help matters either. Between January 1 and November 24 last year, 54,858 fires broke out.

2017: Among the Three Hottest Years Recorded

People cause the majority of wildfires, but climate change acts as another notable contributor. In addition to affecting hurricane intensity, rising temperatures help fires spread and make them harder to extinguish.

Data collected by the National Interagency Fire Center and published by the EPA highlighted a correlation between the largest wildfires and the warmest years on record. The extent of damage caused by wildfires has gotten worse since the 1980s, but became particularly severe starting in 2000 during a period characterized by some of the warmest years the U.S. ever recorded.

Things haven’t changed for the better, either. In mid-December of 2017, the World Meteorological Organization released a statement announcing the year would likely end as one of the three warmest years ever recorded. A notable finding since the group looks at global land and ocean temperature, not just statistics associated with the United States.

Not all the most financially impactful weather events in 2017 were hurricanes and wildfires. Some of the other issues that cost over $1 billion included a hailstorm in Colorado, tornados in several regions of the U.S. and substantial flooding throughout Missouri and Arkansas.

Although numerous factors gave these natural disasters momentum, scientists know climate change was a defining force — a reality that should worry just about everyone.

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Environment

How to be More eco-Responsible in 2018

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eco-responsible
Shutterstock / By KENG MERRY Paper Art | https://www.shutterstock.com/g/kengmerrymikeymelody

Nowadays, more and more people are talking about being more eco-responsible. There is a constant growth of information regarding the importance of being aware of ecological issues and the methods of using eco-friendly necessities on daily basis.

Have you been considering becoming more eco-responsible after the New Year? If so, here are some useful tips that could help you make the difference in the following year:

1. Energy – produce it, save it

If you’re building a house or planning to expand your living space, think before deciding on the final square footage. Maybe you don’t really need that much space. Unnecessary square footage will force you to spend more building materials, but it will also result in having to use extra heating, air-conditioning, and electricity in it.

It’s even better if you seek professional help to reduce energy consumption. An energy audit can provide you some great piece of advice on how to save on your energy bills.

While buying appliances such as a refrigerator or a dishwasher, make sure they have “Energy Star” label on, as it means they are energy-efficient.

energy efficient

Shutterstock Licensed Photo – By My Life Graphic

Regarding the production of energy, you can power your home with renewable energy. The most common way is to install rooftop solar panels. They can be used for producing electricity, as well as heat for the house. If powering the whole home is a big step for you, try with solar oven then – they trap the sunlight in order to heat food! Solar air conditioning is another interesting thing to try out – instead of providing you with heat, it cools your house!

2. Don’t be just another tourist

Think about the environment, as well your own enjoyment – try not to travel too far, as most forms of transport contribute to the climate change. Choose the most environmentally friendly means of transport that you can, as well as environmentally friendly accommodation. If you can go to a destination that is being recommended as an eco-travel destination – even better! Interesting countries such as Zambia, Vietnam or Nicaragua are among these destinations that are famous for its sustainability efforts.

3. Let your beauty be also eco-friendly

eco-friendly

Shutterstock / By Khakimullin Aleksandr

We all want to look beautiful. Unfortunately, sometimes (or very often) it comes with a price. Cruelty-free cosmetics are making its way on the world market but be careful with the labels – just because it says a product hasn’t been tested on animals, it doesn’t  mean that some of the product’s ingredients haven’t been tested on some poor animal.

To be sure which companies definitely stay away from the cruel testing on animals, check PETA Bunny list of cosmetic companies just to make sure which ones are truly and completely cruelty-free.

It’s also important if a brand uses toxic ingredients. Brands such as Tata Harper Skincare or Dr Bronner’s use only organic ingredients and biodegradable packaging, as well as being cruelty-free. Of course, this list is longer, so you’ll have to do some online research.

4. Know thy recycling

People often make mistakes while wanting to do something good for the environment. For example, plastic grocery bags, take-out containers, paper coffee cups and shredded paper cannot be recycled in your curb for many reasons, so don’t throw them into recycling bins. The same applies to pizza boxes, household glass, ceramics, and pottery – whether they are contaminated by grease or difficult to recycle, they just can’t go through the usual recycling process.

People usually forget to do is to rinse plastic and metal containers – they always have some residue, so be thorough. Also, bottle caps are allowed, too, so don’t separate them from the bottles. However, yard waste isn’t recyclable, so any yard waste or junk you are unsure of – just contact rubbish removal services instead of piling it up in public containers or in your own yard.

5. Fashion can be both eco-friendly and cool

Believe it or not, there are actually places where you can buy clothes that are eco-friendly, sustainable, as well as ethical. And they look cool, too! Companies like Everlane are very transparent about where their clothes are manufactured and how the price is set. PACT is another great company that uses non-GMO, organic cotton and non-toxic dyes for their clothing, while simultaneously using renewable energy factories. Soko is a company that uses natural and recycled materials in making their clothes and jewelry.

All in all

The truth is – being eco-responsible can be done in many ways. There are tons of small things we could change when it comes to our habits that would make a positive influence on the environment. The point is to start doing research on things that can be done by every person and it can start with the only thing that person has the control of – their own household.

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