Ethical funds not tackling climate change
A study of funds available in the UK which purport to be socially responsible and ethical has shown that very few actually invest in companies which are directly tackling climate change.
The report, ‘A Guide to Climate Change Investment’, by independent financial adviser Holden & Partners, examined the top 10 holdings of all SRI, ethical and environmental funds available to UK private investors.
It found that most SRI and ethical funds’ top 10 holdings are surprisingly mainstream, with names like Vodafone and Royal Bank of Scotland occurring time and again. However, many also have holdings in large mining corporations as well as BP, Shell, Total and other oil majors.
As a result, investors in SRI and ethical funds, who were hoping to support the low-carbon economy, may find that they are buying into multinationals more associated with being part of the problem rather than part of the solution.
Of the SRI 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. In contrast, environmental stocks make up less than 1% of L&G Ethical Funds portfolio.
The new generation of environmental and climate change funds is far more focused on companies developing global solutions to environmental problems. However, some of these also throw up some curious holdings including Porsche, Renault, Nestlé and Danone.
Peter Holden, partner at Holden & Partners, said: “This report shows that the SRI and ethical funds have not kept pace with the public’s appetite for environmental solutions. Many are investing in mainstream ‘old economy’ companies whose contribution to solving environmental problems is questionable.
“There are good environmental funds available though, the environmental economy is enjoying strong growth and is an investment opportunity. However, it is a complex area and we would recommend that anyone making an investment seek independent financial advice.”