The 16th of October to the 22nd of October is National Ethical Investment Week (NEIW). Simon Leadbetter asks what’s it about.
Which raises important questions, do your values affect your investment decisions and whose future are you investing for? Your own, your family’s, your country’s or your planet’s? While eyes might role at the last in the list, the connection between investment and our planet’s future is profound and we might need to explore it in more depth.
What future do you want your children to have?
Most of what we do in life pails into insignificance against the responsibility of raising children and supporting your children in raising theirs’. We wash them, clothe them, feed them, house them, educate them, entertain them, finance them, pick up the pieces when things go wrong and praise them when they do well. Why? Because we want them to have the best opportunity in the future whatever our own circumstances. We make mistakes, but to err is human. Moreover, if you’re talking to your teenager or have a relationship with your adult child you’ve probably done okay. We all want our offspring to be happy, healthy and provided for.
If you have invested so much emotion, time, money and energy to do the best for your offspring… have you considered what kind of future your investment decisions are creating.
Follow the money
This is where we need to make a small creative leap. It’s a relatively straightforward one but not widely thought about or discussed in relation to investment. It’s very easy to underestimate the wider impact of investing, simply seeing how we invest as a vehicle to pay for something in the future: a good retirement, family holidays, a child’s education or wedding, etc. However all that money we invest is traded many times over in global finance. Global financial trades are far, far larger than the value of the world’s non-financial output. To put this into perspective for every pound of product or service you buy or sell in the real world £98 is traded on global financial markets. Your savings and investments are working round the clock, round the globe investing in things, and speculating.
What we invest in today echoes for future generations
And what are they investing in? You can buy a hybrid car, use renewable energy, switch to energy saving light bulbs and ‘do the green thing’ as much as possible but if your pension, savings and investments are in an oil and gas firm the net effect for the future will be more resource depletion, more pollution and a degraded environment for your kids.
Investment lubricates the economic engine. Companies that receive investment today will grow to create the products and services we buy tomorrow. Those that do not receive funding, unless exceptionally lucky, will usually wither and die.
Previous generations’ investments in oil, gas, mining, tobacco, arms companies and other less savoury industries, such as pornography, has spurred their growth and dominance for the current generation of investors and consumers. If a company receives investment it create a product it intends to sell.
And this creates a trap for current investors. Can you risk investing in renewable energy when so much shareholder value is in oil, gas and mining companies. With so many wars the arms industry pays a great dividend. So what if the oil that one of the companies (that you’ve invested in) wants happens to be in a country they can’t access, then that investment in the arms industry really pays off.
So what is the current generation of investors investing in? Of the top ten companies in the FTSE100, half are in oil, gas and mining and one is in tobacco. Whether you smoke or not, smoking causes one in ten adult deaths globally, that’s six million people (WHO, July 2011). Tobacco companies, tired of endless regulation, restrictions on advertising and health concerns in the developed world, have turned to less regulated, less well-informed people in the developing world to bolster their sales. They have a duty to their shareholders, you, to seek profit. Oil, gas and basic materials (metals, oils and minerals) represent a third of the whole FTSE100. Those companies do not have the best record in environmental or ethical best practice. We cannot deny that many are trying very hard to mend their ways, and it does no one any good to treat them as the enemy. Nevertheless where investment flow, companies will follow. If their share price is affected by the flow of funds into renewable or sustainable companies, they will only mend their ways faster.
No really, what future do you want your children to have?
Therefore, as you care about the future your children and grandchildren will live in the question to ask yourself and/or your financial adviser is “what kind of future do I want to invest in?”
Globally we need cleaner sources of energy as demand rises for energy hungry products and more efficient production processes as natural resources run out. The developing world wants all our shiny toys after all. In the developed world we need businesses to find cost-effective and innovative ways to support an ageing population with all the physical and mental challenges that arise from living significantly longer.
These are the companies our children need us to invest in to create a better future and these are the companies that should make up the FTSE 100 of 2020 and beyond if you want them to live In a stable world.
Take action today
Many ethical funds that invest in these kind of companies deliver solid returns with solid values. A professional financial adviser can guide you through the options. It takes no more than ten minutes to start the process. Phone your IFA, if you have one, or fill in our online form and we will put you in touch with one of our expert panel of specialist financial advisers.
Spending a small amount of time today will make a large difference tomorrow.
Blue & Green Tomorrow is delighted to support National Ethical Investment Week.