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‘There is no long term performance penalty for investing ethically’

Audrey Ryan and Ryan Smith, of investment managers Kames Capital, inform Alex Blackburne about the ins and outs of the company’s Ethical Equity Fund.

Blue & Green Tomorrow’s mantra is simple, ‘We want the world to be as blue and green tomorrow as it was yesterday’. Arguably the most effective way of achieving this entirely realistic dream is for everyone to invest in ethical funds.

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Audrey Ryan and Ryan Smith, of investment managers Kames Capital, inform Alex Blackburne about the ins and outs of the company’s Ethical Equity Fund.

Blue & Green Tomorrow’s mantra is simple, ‘We want the world to be as blue and green tomorrow as it was yesterday’. Arguably the most effective way of achieving this entirely realistic dream is for everyone to invest in ethical funds.

Kames Capital’s Ethical Equity Fund, an Open-Ended Investment Company (OEIC), was one of the first investments to offer ethical criteria when it was founded in April 1989.


Under the company name of AEGON Asset Management UK, which it had worked under until relatively recently before changing to Kames Capital, the fund is negatively screened. This means it screens out companies based on various ‘negative’ activities, as opposed to screening in ones that have positive aspects.

The criteria that we apply are quite diverse”, explains Ryan Smith, head of corporate governance at Kames Capital.

They cover a range of traditional ethical screening factors that you would expect to see – alcohol, tobacco, weapons, human rights, pornography, and animal welfare.

Those criteria have been set out to be as clear and explicit as we think that we can make them, so that advisers, IFAs and their clients can hopefully understand straight away the types of companies that the fund will and won’t invest in.”


Already, it’s clear that although Kames Capital’s fund is most certainly an ethical one, its philosophy is on the other side of the spectrum to our previous focus, WHEB AM’s Sustainability Fund, which actively seeks out investment in companies from three specific sectors.

In terms of the ethos of the fund”, Smith continues, “It’s a traditional ethical fund that avoids investment in quite specific areas that ethical investors are generally interested in.

It doesn’t have any positive remit, it doesn’t have a weighting towards renewables, and we’re not looking to change the world.

It’s just a fund that is fairly traditional and screens out certain activities.”

The fund is rated ‘dark green’ because of its rigid investment guidelines. These kinds of funds are often considered the greenest kind of investments, because they are completely ruling out investment into any kind of unethical company.

The fund is benchmarked against the FTSE All-Share and the UK All Companies sector – “a standard against which the performance of a security, mutual fund or investment manager can be measured”, according to Investopedia.

Audrey Ryan, fund manager at Kames Capital since 1999, explains why they don’t benchmark the fund against the FTSE for good index.

Given we’re about dark green screening funds, then actually the FTSE for good index is not that much more representative for us than the FTSE All-Share.

When we’re speaking to investors, existing and potential, people understand what the FTSE All-Share benchmark is, and we can explain to them what our criteria are.

For us, that’s the right thing to do.”

At the end of November this year, the fund was worth £236m. Its top long positions vary greatly; with the top ten including such companies as Vodafone, Prudential, BG Group, Tullow Oil and Aggreko.

The starting point is to apply the ethical screen, and that creates an initial investable universe”, explains Smith, who also leads the socially responsible investment aspect of Kames Capital.

That’s basically handed over to Audrey and her colleagues, and from that, they will create a portfolio which matches as closely as they can, the UK equity strategy.

We don’t try to put a positive ethical spin on the companies that we invest in. The companies that are there are there because they don’t breach the ethical criteria.”

Fund manager Ryan adds to Smith’s comments, stating that the selection process and criteria that they had at Kames Capital was a winning formula.

In terms of the investability of the fund, clearly there are certain sectors of the marketplace that we cannot invest in, but we have a proven track record of thinking outside the box.

We’ve got a UK equity team of 12, and within that 12 we’ve got three individuals who specialise in looking at UK and small cap stocks, and that’s vital for managing the ethical equity fund, because once Ryan has done his screening, a large proportion of what the stocks that I can buy are in the small and mid cap space.”

The winning formula is proven by the fund’s performance over the last five years, as Ryan notes, before dispelling a common myth in the ethical investment field.

In terms of cumulative performance”, she says, “the median fund has returned 5.91% and this fund has returned 8.12%, so it’s beaten the benchmark”.

There is no long term performance penalty for investing ethically, based on our criteria and numbers. Having said that, you will get the odd year whereby it’s difficult for a fund like this to outperform against the market place.”

Ryan offered a final thought, or a prediction, to Blue & Green Tomorrow readers, about the near-term future of ethical funds.

We think stock selection will be increasingly important looking into next year, because we do think we will see companies disappoint on earnings, so it’s very much focusing on the fundamental research that we can do as a house to identify stocks that we believe are going to outperform.

I get slightly cautious in terms of outlook overall for next year, in the sense that we will all appreciate the fact that we will see fiscal tightening, not just in the UK and Europe, but also starting to take effect in the US as well.

We do think it’s going to be a difficult environment.”

Difficult, maybe, but this difficultness is widespread across the whole economy, and certainly isn’t exclusive to ethical funds. Bearing this in mind, the most obvious choice if you want to help make a difference to the environment, is to choose to invest ethically.

Like Clare Brook before her, Ryan emphasised the point that ethical funds are a relatively long term commitment. Some people do manage to play a short term game, but if you really want to do your bit making the world as blue and green tomorrow as it was yesterday, then you’ll stick with it for the long run – not just for the planet’s gain, but for your own, too.

If you would like to know more about Kames Capital’s Ethical Equity Fund, visit their website. Otherwise, if you would like more information about investing ethically more generally, ask your financial adviser, if you have one, or complete our online form and we’ll connect you with a specialist ethical adviser.

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Green Weddings Trend: Why 70% of Newlyweds Are Going Green

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A couple of months ago, my best friend got married to her new husband. They are both very eco-conscious people, so they decided to have a unique twist on their wedding. They asked for the following:

  • They arranged a carpool with their friends.
  • They didn’t have any balloons. Instead they used umbrellas.
  • They used plant materials instead of plastic confetti.
  • My friend insisted her husband not purchase a diamond. In addition to being ecologically conscious, she didn’t like the idea of having a stone that was used in conflict zones.

My friends aren’t the only ones making these changes. In fact, nearly a quarter of all newlyweds are organizing green weddings.


Green Weddings Are Becoming the Norm

People are more concerned about green living than ever before. They are trying to incorporate environmental protectionist ideas into every facet of their lives, even the most intimate, such as marriage. A growing number of people are trying to have green weddings, which can make a big difference in reducing their carbon footprint.

How much of a difference can this make? Here are some statistics to bear in mind:

There are a number ofreasons that green weddings are becoming more important. Here are a few.

People Are More Worried About Environmental Preservation than Ever Before


Green living in general is becoming a greater concern for most people. Even younger conservatives are breaking from their older counterparts by insisting on fighting climate change. According to a poll from Pew Research earlier this year, 75% of Americans say that they are very concerned about protecting the environment. Having green weddings is a good way to act on this concern.

One of the biggest changes people are making is using recycled products for their green weddings. This is explained by the research from Pew:

“Overall, 32% of U.S. adults say they are bothered a lot by people throwing away things that could be recycled. Roughly six-in-ten Americans (61%) who say they always try to live in ways that protect the environment say it bothers them “a lot” when others throw away things that could be recycled. Among those who are less focused on environmental protection, only a quarter say it bothers them a lot when others don’t recycle. People who are environmentally conscious are also twice as likely as others to say that seeing someone incorrectly putting trash in recycling bins bothers them a lot (42% vs. 21%).”

Indifferent Politicians Are Driving them to Take More Initiative

Many politicians in power have been very hesitant to take action on climate change. Many of them have openly stated that it is a hoax. These politicians are forcing people to do what they can in their own lives to make a difference. Making small changes, such as hosting green weddings, is a great way to improve the environment without waiting for political momentum.

Cost and Simplicity

A couple of the biggest reasons that people want to host green weddings have nothing to do with their concern for the environment. Running green weddings is simply cheaper and simpler than having a massive, traditional one. One of the biggest changes is that they are buying green engagement rings from the best brands.

Green Weddings Are the Future

Green weddings have become very popular over the past few years. They will probably account for close to 90% of all marriages by 2025. People that are planning to get married should look into the benefits and plan accordingly.

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Features

Green Tech Start-Ups: Are they the Future?

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Endless innovations are occurring in green companies, reinventing the industries they belong to. Gradually, they are beginning to amass more success and popularity. Consequently, these factors serve as a good indicator for green technology businesses, and their development must begin somewhere.

Green tech start-ups boast a wide array of opportunities for the economy and environment, while boosting recruitment openings with valuable services. While the technology industry is littered with high revenues and competition, the green tech start-ups are the clear sign of a cleaner future.


Fulfilling a Genuine Need

Many tech companies will market themselves as the ultimate tech giants to shift stock and make profit. As they all vie for attention through warped corporate rhetoric, there is only one ethical winner; the start-up green tech company.

Some argue that mainstream tech businesses have grown far too big, branching out into other industries and standing between the consumer and practically everything they do. However, green tech start-ups go beyond the shallow ambitions of a company, answering a call to sincerely help the customer and climate in any way they can. Of course, this is an attractive business model, putting customers at ease as they contribute to a humanitarian cause that is genuine through and through.

After all, empathy is a striking trait to have in business, and green tech start-ups maintain this composure by their very nature and purpose.

Creating Opportunities

Despite the pursuits for clean energy still needing more awareness, green tech is an area that is ripe for contribution and expansion. There’s no need to copy another company or be a business of cheap knockoffs; green tech start-ups can add a new voice to the economy by being fresh, fearless and entrepreneurial.


Technology is at its most useful when it breaks new ground, an awe that eco-friendly innovations have by default in their operations. Of course, green tech start-ups have the chance to build on this foundation and create harmony instead of climate crisis. Ultimately, the tech advancements are what revolutionise clean energy as more than an activist niche, putting theory into practice.

Despite the US gradually becoming more disengaged with green technology, others such as China and Canada recognise the potential in green technology for creating jobs and growth in their respective economies. The slack of others spurs them on, which creates a constant influx of prospects for the green tech sector. Put simply, their services are always required, able to thrive from country to country.

A Fundamental Foresight

Mainstream technology can seem repetitive and dull, tinkering with what has come before rather than turning tech on its head. Since 2011, technology has been accused of stagnation, something which the internet and petty app services seem to disguise in short reaching ideas of creativity.

However, green tech start-ups aren’t just winging it, and operate with a roadmap of climate change in the years ahead to strategize accordingly. In other words, they aren’t simply looking to make a quick profit by sticking to a trend, but have the long-term future in mind. Consequently, the green tech start-up will be there from the very start, building up from the foundational level to only grow as more and more people inevitably go green.

They can additionally forecast their finances too, with the ability to access online platforms despite the differing levels of experience, keeping them in the loop. Consequently, with an eye for the future, green tech startups are the ones who will eventually usher in the new era.

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