Investing Ethically
Climate
change is a very high profile topic with everybody trying to jump on
the
bandwagon, and financial institutions are no exception. Ethical
investment is a
great opportunity for conscientious investors to help with the future
of our
planet, but are all the funds that claim to be ethical really committed
or are
we just seeing a token burst of green wash?
You
might think climate change is the single biggest issue facing us, and
perhaps
you agree that it needs a huge financial input to even scratch the
surface of
the problem. If you are thinking about doing your bit by investing in a
climate
change fund, you may be surprised if you look below the surface and
discover
just how ‘green’ some of these funds really are.
‘Climate
change’ is a broad term that is applied to any fund that claims to be
investing in companies that have something to do with tackling climate
change
issues. They range from very general funds that invest in almost
anything
(including arms and tobacco) as long as it has a suitably strong
recycling
policy, to very specific funds that invest only in one specific part of
one
specific sector such as renewable energy.
They
are different from traditional ethically screened funds because they
are not
concerned with negative screening or engagement. They positively
screen, some
very specifically whilst others are very vague.
To
throw a little light on this subject, we have reviewed 12 climate
change funds
and revealed some interesting facts:
8
out of these 12 funds invest in the nuclear industry – claiming that
its
better the world doesn’t fry, even if it means risking another
Chernobyl!
One
invests in BAE Systems, presumably on the basis that they are
developing less
environmentally harmful bombs.
One
fund even has the following negative comment:
- “Extremely
inclusive fund with exposure to arms, tobacco, mining as well as
nuclear – 10% of fund goes into companies that could be deemed to be
connected to climate change in any meaningful sense. - Short
track record.
-
Very high (and
unreasonable!) ongoing costs with the performance related fee
The
best performing fund was the Schroder’s Global Climate Change fund
- the worst the Guinness Alternative Energy Fund with a 44%+ difference
in the returns.
So
are climate change funds “ethical funds” in the traditional sense?
Not really, but perhaps they fall into the “Socially Responsible
Investment” camp. The jury’s out on this one so we suggest you
judge for yourself. We’ve made the report available on our web site
(www.investing-ethically.co.uk
and I’d be very interested in your comments.
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