An environmental conscience has long been considered a handicap in investing, but since the introduction of the EU Emissions Trading Scheme in 2005, business now has to pay for its emissions, so improving environmental performance can also improve profits and impact stock prices. A number of investment banks offer 'green' or 'ethical' funds and increasing numbers of IFA (Independent Financial Advisors) specialise in this area.
The usual assumption is that 'green investing' will always under-perform, because it imposes extra costs and restrictions on business. Recent research by the environmental consultancy 'Trucost Plc' dispels this assumption. They concluded that far from offering lower returns, investments in companies with lower carbon emissions can in fact out-perform the market.
Many of us do not have the luxury of private investment portfolios, but we do have pensions and other personal investments managed through investment funds. According to Trucosts' analysis our choice of fund can make a significant impact on the emissions for which our individual investments are responsible. They have calculated that on average, ?0,000 of investment equates to 10 tonnes of CO2 annually. Their survey of fund performance in terms of carbon emissions, carried out in June 2006, shows a very significant variance in performance. Moving a £10,000 investment from the worst performing fund to the best performing will mean that the investment is responsible for a whopping 14 tonnes less of CO2 emissions every year. To put this in context, this saving is more than twice the 6 tonnes of CO2 that an average UK household makes every year.
A further interesting finding from the analysis is that a number of mainstream funds significantly out-performed some of the specialist 'green' funds. A full copy of 'Carbon Counts: The Trucost Carbon Footprint Ranking of UK Investment Funds' can be viewed and downloaded from the Trucost website
Other useful sources of information are:
EIRis - The Ethical Investment Research Service
EIA - The Ethical Investment Association.
The Green Money Journal
Clean Edge