– Have investor in green funds unwillingly bitten into the red apple? –
Not only initiated by the public awareness in how businesses make their money awakened by the financial crisis, did a new trend in investment style emerge and develop. To the so called ethical funds specific criterias are attached to reflect the needs of a new species of investor: one questioning the business their money is contributing to. Though recent investigations have shown that it isn’t that straight forward and one still ought to be careful of what your broker may offer in disguise of environmental and community friendliness.
Patrick Collinson enriched the Guardian (14th August 2010) with a list of funds, splitting them into two groups: the heroes and villains. He starts his published article with an example of the pensions company Zurich, which tries to attract the social responsible target group by offering “companies and institutions which actively enhance the global environment and community”. One of their funds, of which they are convinced, the customer would appreciate is Jupiter Environmental Opportunities. Surprisingly, 13.5% of the £16m fund is made up from shares in oil groups BP and Shell. Now here I think there is really now explanation needed to recognize the controversy. Overall, a large amount of the funds researched by Collinson are popular names indeed, like HSBC and Vodafone, though are not really environmental minded.
Zurich’s attempt to reason their fund you can boil down to the variety of subjective opinions about ethical and environmental investments. Thus, they wish to offer their customer a wide choice and enable a long-term benefit by including companies like BP. This sounds like they don’t have much trust in ethical fund at all? Shall the customers then have it instead?
Another point resulting in Collinson kicking Scottish Widows and Prudential out of paradise, is that these companies invest in banks. He reasons ethical investors can’t identify themselves at all with the business’ approach related to selling practices and lending criteria of the financial sector.
To avoid a wholly pessimistic impression there do exist the type of investment embodying all the criterias our investors are looking for. Jupiter’s Ecology for instance is number one on Collinson’s list of heroes. It includes companies like Vestas, producing wind power; and United Natural Foods, distributing organic products in the States, yet nothing in the financial sector.
Conlcuding, why it matters for this kind of investor, the strapline of http://www.yourethicalmoney.org has it summed up quite nicely. It says: ‘Money makes the world go round and your finance plays a part in the global economy. By selecting an ethical product or an ethical bank or fund, you can play a part in creating a better world.‘
A critic Collinson raises his self is the missed opportunity to engage with these companies to exploit the customer’s power towards changing practices, by entirely avoiding them. But how much power do we really have?
From experience, I would say the kind of investors we are speaking of here are pretty serious about their goal of including environmental awareness into every section of their life. Still, this article does provoke the theory that the problem isn’t that green funds have been invaded by companies not suiting the investors’ criteria, but rather that non-authentic funds like to hijack the word ‘Ethical’ for marketing objectives.
PS: A tip for choosing funds: the Ethical Investment Research Service, came up with a guide of 90 UK green and ethical funds at yourethicalmoney.org. If this article awakened your interest about knowing where your invested money ends up why not also have a look at the link below about “community interest companies”.
‘Ethical investment schemes offer power to the people‘
- Jupiter Ecology
- IM WHEB Sustainability Fund
- BlackRock New Energy Technology
- Aegon Ethical Equity Fund
- Impax Environmental Leaders
- Zurich Environmental Opportunities Pension Fund
- Jupiter Environmental Opportunities
- Marks & Spencer Ethical
- Scottish Widows Environmental Investor
- Prudential Ethical