Eco-investors told to do their homework
Eco-conscious investors are being warned to read the small print before putting their money into ethical funds to ensure they know just how much of their cash will be invested in environmental causes.
A report by independent financial advisers Holden and Partners examining the top 10 ethical and socially responsible funds in the UK has shown that very few invest in companies which are directly tackling climate change.
The firm warned many members of the public may think that ethical equates to environmental, but often the funds have holdings in large mining or oil companies such as BP.
Mark Hoskin, partner at Holden and Partners, told edie: “An ethical fund will have a whole range of issues that it will look at, such as human rights, animal testing or weapons. Environment is only part of that.
“But we were surprised, even as advisors because we thought they might be more involved in environmental stocks.”
Environmental holdings can also be more risky than investing in multinationals which may have a questionable environmental record.
Mr Hoskin said: “I think investors need to go to advisors who know what they are doing and can work out what the investor is trying to achieve.
“The investor may be prepared to risk their money if it is for environmental reasons.”
He added that Holden and Partners, which plans to update the guide every six months, expects climate change funds to be a large growth area.
The report A Guide to Climate Change Investment, shows that of the funds that gave full information about their holdings, Henderson’s Industries of the Future scored most highly with 51.1% of its fund in environmental solutions providers, compared to less than 1% in L&G Ethical Funds portfolio.
The report also revealed that there are a number of purely environmental funds that investors can take advantage of, such as Impax Environmental Markets Trust Plc.
Publication of the report coincided with an announcement from Standard Life Investments that its ethical fund will no longer invest in airline stocks after its annual ethical investor survey revealed 30% of customers wanted airlines excluded.
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