Climate change and global warming is the big issue of the day with politicians competing to see who the greenest is.
Whether it is the Tories under David Cameron proposing limits on how many flights people can take or Gordon Brown proposing tax rises for environmentally damaging behaviour it all sounds like it is going to cost us money.
For most of us adapting to environmental issues seems to be about the big stick of tax rises or limits on our behaviour with no carrots to encourage us. Many of us want to be good with our investing and don’t like putting money into "unethical" activities such as arms or tobacco manufacturing.
Ethical investing isn’t just a protest issue for long-haired student types, MoneyExpert.com shows you how your money can be made to work for you in a way which will leave you with a clean conscience and healthy bank balance.
Ethical investing is already big business. There is around £10 billion invested in retail funds and £80 billion in occupational pension schemes already. The problem for those managing this money and individual investors considering making an investment is the issue of defining what you consider an ethical investment.
You don’t need the ethical powers of a philosopher to work out whether you are making the right investment choice. MoneyExpert.com has a few tips which show you how the professional fund managers decide what is ethical and what isn’t.
The first method is negative "screening." This works by ruling out companies involved in selling addictive substances, pornography, armaments, gambling or serious pollutants. They need to make more than 10% of their sales from these activities to be ruled out
The second is positive "screening." This looks at identifying companies who are working in areas which will benefit the environment, through energy, transport, water management, waste management and sustainable living. Their solutions could shape the way we live and industry operates in the 21st century.
Wind energy is essential if the UK Government is to meet its target of 20% reduction in CO2 emissions by 2010. This sector has averaged 28% annual growth for the past five years. A new growth area is in companies who create off-shore wind power. Similarly, the solar power market grew by 60% annually from 2000 – 2004 and is predicted to grow by 30% per year through 2010 and beyond.
With finite oil reserves bio-fuels may become a major energy source in the coming years. By investing in those companies and economies that grow these crops you could cash in.
Only 0.01% of the Earth’s total water is usable, 97.5% is salt water and the rest is locked into glaciers and ice caps. Put simply if the world’s water supply were stored in a five-litre container, available freshwater would only fill a teaspoon. Currently about 20% of the world’s population is facing water shortages, expected to rise to 30% in 2025. China has 22% of the world’s population but only 7% of the world’s fresh water.
New water treatment technologies have emerged such as ultrafiltration, which removes microbial contaminations without increasing the concentrations of by-products. As filtration and purification help ease water shortages, these technologies are expected to see significant growth, of 15%-30%, over the next three to five years.
The introduction of the congestion charge system has seen the number of people using public transport soar. Bus usage in London is at its highest level since 1968. As people are increasingly discouraged from using their cars those companies who supply public transport are likely to see significant returns, particularly if a road pricing system is introduced.
The UK produces a phenomenal amount of waste. With landfill space reaching capacity, waste incineration and recycling companies which innovate to cope with increased demand will stand to benefit.
In the UK organic food sales have climbed from £100 million in 1993/94 to £1 billion-plus and this trend looks set to continue as public support for cheap, mass produced agri-business often involving the use of chemical pesticides dwindles.
Look for opportunities
MoneyExpert.com has shown that there is no shortage of opportunities for an ethical investor. If you are serious about investing however it is important to research carefully the company and products you’re going to put your money into. Think about how much you can afford to invest, and if the worst should happen, how much you can afford to loose.
See an Independent Financial Adviser. They are likely to know which investment firms have funds invested in ethical companies and will be able to advise you on which fund is likely to produce the return you are looking for.
Click through to MoneyExpert’s Investment section – there’s a whole area dedicated to ethical investments!