The Government Global Pension Fund, which is the state pension investment fund of Norway, had made news at the beginning of the year, when it pulled out of investments in certain companies due to their connections to the tobacco industry.

The criticism, by leading Oxford ethical fund researchers, described the exclusive ethical investment strategy of the Norwegian investment fund as ‘self-defeating’.

Speaking for the managers of the ethical fund, special adviser Trude Myklebust said the investment fund will continue to refine its approach to ethical investments, moving from evaluating companies on a simple ‘do no harm’ basis to demanding a more proactively ethical stance.

The investment fund has, however, declined to exclude Israeli companies from its portfolio, following the recent attacks on ships carrying aid to Gaza, according to the Norwegian Finance Ministry.

Ethical Funds Investments

Ethical funds investments are a relatively new area of the funds industry, but offer investors a great opportunity to combine their ‘green’ investment philosophy with ethical investments that represent a real vote for more responsible environmental practices.

Interest in ethical investment is growing extremely rapidly in the UK. The ethical investment fund watchdog EIRiS reveals there is currently £7bn invested in ethical funds in Britain, compared to £1.5bn ten years ago.

Seventy per cent of people in Great Britain strive towards ideals that are green and ethical, and 49% of people with savings and investments would like to make a difference with their money, according to EIRIS.

Principle First offers  a range of ethical funds investments, including an ethical investment in cleantech, alternative energies and wind power through the IMPAX Environmental Leaders Fund, or the ‘greenest’ ethical fund of all, a direct ethical investment in the forestry sector through the Quadris Environmental Fund.

Are you interested in ethical investments or in learning more about our ethical portfolios? Make an investment fund enquiry now or ring 0800 678 5929

Is it acceptable to include major oil companies such as BP in an Ethical/Sustainable fund?

In the aftermath of BP’s Deepwater Horizon rig explosion, America’s southern states and coastal communities are now facing an economic and environmental disaster. With the scale of devastation and economic loss, particularly to the valuable shrimp industry, it is very difficult to justify an oil company’s inclusion in any investment fund categorised as Ethical/Sustainable.

Although you may be investing in a fund, which advertises itself as Ethical/Sustainable, the chances are it includes major holdings in some of the world’s major energy and oil companies such as BP, Shell, Statoil and Petrobras.

BP, the company currently at the heart of one of the worst ecological disasters to date, could be at the heart of your Ethical/Sustainable fund.

Oil and gas companies are often justified for inclusion in sustainable investment funds due to their mitigation efforts, they may be some of the largest polluting contributors in the world, but develop a few environmental initiatives and some spin and suddenly they are ‘sustainable’.

With a potential 19m gallons of oil that could continue to pump into the Gulf of Mexico from the Deepwater Horizon rig, it underlines the question of what exactly constitutes a Sustainable Investment Fund?

There is no doubt oil will continue to play an important role in our future but that doesn’t mean it should get elevated to Ethical/Sustainable status.

It is our view that when green investors decide they want to make a difference with their investment, it is with a view to making a real difference and helping to encourage companies who are working in what we call Primary Sustainovation industries.

Principle First’s investment advice experts, have devised a unique ‘Sustainovation’ Ranking Index to assist ‘Green-minded’ investors to identify the funds that live up to their investment ideals. Funds categorized as having the top ‘Primary Sustainovation’ ranking are those that are investing almost entirely in companies and sectors that directly influence future sustainable energy, energy efficiency and resource management.

The Ethical/Sustainable investment funds with the Primary Sustainovation ranking are:

Allianz RCM Global Eco Trends Fund
Henderson Global Care Growth Fund
Henderson Industries of the Future Fund
IFSL Impax Environmental Leaders Fund
IM WHEB Sustainability Fund
Jupiter Ecology Fund
Quadris Environmental Fund

Investors should note that these are not necessarily the highest or best performing funds in the Ethical/Sustainable sector, but in our opinion they are the ones which provide the best fit for living up to the high investment ideals of the ‘Greenward’ investor.

Speak to one of our investment advisers on 0800 678 5929 or make an investment enquiry

Unions are claiming that the move could slash the pensions income of employees by up to a third.

If it goes ahead, the Aviva move would further confirm a trend among many household-name companies in the UK, to shift from final salary pension schemes to defined contribution pension schemes. Similar steps have already been taken by Barclays, Vodafone, BMI, IBM and the Morrissons supermarket chain, in the last year.

Final salary pensions, also known as defined benefit pension schemes, provide a guaranteed payout to employees based on their salary at retirement and their number of years with the company. In harsh economic times, mediocre returns on the stock market investments underlying final salary company pension schemes can fall short of the schemes’ obligations for payouts to retired employees. However, because of the guarantees, the payments must still be made, leaving the company to stump up any shortfall from its own resources.

While only a third of Aviva’s UK staff are in the final salary pensions scheme, it was eating up two-thirds of Aviva’s contributions to UK staff pensions, the company revealed.

Aviva now proposes to move future employee contributions into a defined contribution pensions scheme, while protecting the funds already saved into the final salary pensions scheme.

In a defined contributions pension scheme, there is no guaranteed payout, and the employee’s retirement fund is dictated by how well (or how badly) the investments in the scheme have done. In other words, companies like Aviva no longer have guarantees to meet under a defined contributions pension, and as such the investment risk is transferred from the employer  to the employee.

Aviva’s final salary pensions scheme includes the schemes of its own employees and those of the RAC motoring group, which it owns. The combined deficits of the two company pension schemes within the overall scheme are now £3bn, having risen from £1bn in March 2006, Aviva said. The closure of the final salary pensions scheme would affect 7,600 Aviva and RAC employees.

Aviva has stated that already-retired members of its final salary pensions scheme, or those who have frozen or deferred their pension in the scheme, will be unaffected by the closure.

Aviva has a total of 19,500 employees in the UK, of which 70% are already in defined contribution or money purchase pensions, compared to the 7,600 still in final salary pensions.

A new initiative to help identify sustainable practices and sustainable businesses looks set to improve confidence in ethical investments.

The Global Initiative for Sustainability Ratings (GISR) aims to provide a unified system for rating companies with truly sustainable business practices.

GISR aims to offer its benchmark as an alternative to the plethora of different sustainability ratings, tools and methods now operating, which it claims are confusing the market, undermining confidence and detracting from the establishment of a centralised order in which ethical investors can trust.

GISR has declared its hope that it can influence asset owners, asset managers, and government procurement practices, driving society in general towards companies that are true sustainability leaders.

GISR claims it is collaborating with asset managers, pension funds, foundations and non-governmental organisations that share a commitment to shaping and strengthening the future of sustainability ratings.

Customer confidence in ethical funds and the ethical investments sector has been hampered, due to the difficulty of identifying companies which truly implement ethical values. Recent research by the ethical watchdog EIRiS showed that 44% of ethically-minded people claim that clearer evidence is needed of the ‘green’ impact of ethical investments. Interest in ethical investments is growing, however, and there is currently £7bn invested in ethical funds in Britain, compared to £1.5bn in 2000, according to EIRiS.

Ethical funds limit their investment strategy to those companies that match their ethical criteria.

Some funds use ‘positive screening’ to locate and include companies which manufacture environmental products, encourage biodiversity, or promote renewable energies.

Other ethical funds use ‘negative screening’ to exclude companies in certain industrial sectors such as tobacco, alcohol, meat, nuclear power, and defence, or avoid specific activities such as deforestation, exploitation of workers, and animal testing.

GISR grew out of the Tellus Institute’s ‘Corporation 20/20′ project, which was backed by a range of the world’s largest companies and organisations including General Electric, Hewlett Packard, Citigroup, and Greenpeace. Moving forward, GISR has said it hopes to grow into an independent, not-for-profit, global organisation.

A new milestone in ethical investment at global level has been laid today, as four Swedish government pension funds have excluded an armaments firm from their portfolio, for alleged breaches of ethical conduct.

Acting on the advice of their Ethical Council, the Swedish funds have terminated their investments in the Israeli company Elbit Systems, which supplies a surveillance system for parts of the West Bank barrier. Elbit Systems had ignored repeated invitations to clarify disputed allegations that it was linked to violations of international rights conventions.

This follows a similar ethical stance taken in 2009 by Norway’s pension fund, which withdrew from investment in the tobacco industry.

Ethical Investments now possible for all

Ethical investment is now an option for every investor, at personal level, through a growing range of ethical investment funds.

Ethical funds choose the companies where they invest based on negative screening or positive screening.

Funds using negative screening avoid certain industries they deem to be unethical, based on those companies’ activities or products. These may include tobacco companies, companies associated with animal testing, deforestation, meat production, nuclear power, pollution, military, or worker exploitation.

Positive ethical investments go one step further, and favour a range of activities generally supported by ethical investors, such as biodiversity, environmental products, renewable energies, sustainable forestry, and water management.

Ethical investments are an easily accessible way to ‘vote with your cash’, and build an ethical stance into your personal financial planning.

The challenge continues for managers of ethical funds, in their quest to verify which companies really meet their ethical investment criteria.

Ethical watchdog EIRIS claims that almost half of manufacturing companies fail to monitor the record of the companies in their supply chain, with regard to workers’ rights and labour standards*.

EIRIS found that 45% of companies analysed had no ethical policy or management systems in place to protect labour standards among their suppliers, and therefore fail to report on the issue.

Focusing on developed world large and mid-cap companies, EIRIS found that 13% were high or medium risk for supply chain labour standards.

The consumer industry was by far the largest offender, accounting for 66% of these companies.

Products with the greatest likelihood of poor labour standards in manufacture are clothing, footwear, toys, consumer electronics, and agricultural items.

Interest in ethical funds investments is growing extremely rapidly in the UK. EIRiS reveals there is currently £7bn invested in ethical funds in Britain, compared to £1.5bn ten years ago.

Seventy per cent of people in Great Britain consider their outlook and lifestyle to be green and ethical, and 49% of people with savings and investments would like to make a difference with their money, EIRIS adds.

However, investors remain sceptical of how ethical so-called ethical investments really are, and 44% claim that clearer evidence is needed of the ‘green’ impact of ethical investments.

*Source: ‘A Risky Business’, EIRIS Convention Watch research

Those of us interested in ethical investment think primarily of ethical funds, but we may soon be able to ‘invest’ ethically on a small scale as well, when doing our weekly shopping at the supermarket. 

Tesco has opened the world’s first ethical supermarket with a zero carbon footprint in Ramsey, Cambridgeshire, and the operation of the store has no carbon impact on the environment over the year. 

The store generates its own power onsite from renewable fuels, including vegetable oil, and the traditional steel and plastic frontage is replaced by a sustainably-sourced timber frame. 

Other zero carbon features include: 

• Roof lights and sun-pipes that allow maximum use of natural sunlight on the sales floors
•  Energy-efficient heating and air conditioning systems
• No harmful refrigerants in food and building cooling/heating systems
•  The UK’s first LED-lit car park 
• Solar-powered street lighting and crossing beacons 
• Low-energy bakery ovens

 While the Ramsey store is a unique pilot project, Tesco will build on its design and has the expressed intention of becoming a zero carbon business by 2050. Tesco will incorporate aspects of the Ramsey prototype into future new builds, so that by 2020 each new store will produce 50% less carbon than a store built in 2006.

Are you interested in investing your cash in ethical funds, which aim to support only companies that make a positive contribution to the environment? Find out more about ethical investments and our investment portfolios here.

The need for workers to look after their own pensions provision has been underlined again, as figures reveal that 75% of UK final salary company pension schemes are now officially in deficit.

Total deficits in final salary company pension schemes reached £52bn in January 2010, having stood at £33bn just a month earlier, according to the Pension Protection Fund (PPF).

Final salary company pension schemes pay retired workers a retirement income related to their salary when they leave the company, and their total years in service.

However, the investment risk for this type of company pension lies with the company, if the investments in the scheme fail to provide sufficient revenues to meet its commitments to past employees. This is because, in this situation, the company must ‘stump up’ from its own funds to make up the difference and ensure that payment obligations are met.

For this reason, many companies have been financially drained by their pension schemes in recent years, and have initiated a strategy of systematically dismantling their final salary scheme by closing it to new members.

The alternative for many workers will be a defined contribution pension scheme, where retirement income is still dependent on the investments in the scheme, but there is no guaranteed level of income. In other words it is the worker, and not the employer, who bears the risk if a pension fund underperforms.

Workers are free to look beyond company pension schemes by setting up their own pension with the pension advice of a qualifed independent financial adviser.

Norway’s national pension fund has sold off Euro 1.8 bn in tobacco shares, claiming its action reflects the “commonly held values of the owners of the fund.” The fund’s increasing focus on ethical investments follows a review of the Norwegian Tobacco Act and a drive to stop smoking in the country which was one of the first to ban smoking in public places.

Ethical funds now make it possible for the individual investor to opt for an ethical investment, in the same way as the Norway fund.

Having worked with a financial adviser to define your personal risk profile, you can then choose from over 100 ethical investment funds currently available on the UK market.

These are broadly divided into ethical funds based on negative screening, and ethical funds based on positive screening.

Funds investments using negative screening ‘block out’ certain industries which the investor defines as unethical, based on their activities or products.

In addition to tobacco these may avoid companies associated with animal testing, deforestation, meat production, nuclear power, pollution, military and weapons, worker exploitation, and oppressive government regimes.

Positive ethical investments go one step further and attempt to locate companies associated with a range of activities supported by ethical investors, such as biodiversity, environmental products, renewable energies, sustainable forestry, and water management.

The Principle First Ethical Investment Portfolio V1 is a an investment portfolio which takes the ‘legwork’ out of ethical investing by providing a group of investments which meet our requirements regarding low risk and high performance.

As a result, a quarter of men and 64% of women are planning to work beyond the state pension age, with most of them listing financial necessity as the reason, according to the Equality and Human Rights Commission (EHRC)*.

This newly-emerging group of older but able-bodied people has already been dubbed ‘the welderly’ by politicians.

The percentage of pensions holders still seeking some degree of gainful employment, including part-time work, is likely to be much higher than the figures above. The Commission reports that 85% of those over the state pension age say that greater availability of part-time or flexible jobs would help them come back into the workforce.

Recent trends have shown a gradual erosion of commitment to pensions provision by both the state and the private sector, in particular through the gradual closure of many defined benefit (final salary) company pension schemes.

The report follows on from recent research by the central European statistics agency Eurostat in Brussels, which revealed that a third of pensioners in the UK are officially ‘living in poverty’.

Poverty is defined by Brussels as subsisting on less than 60% of the current national average wage of £316 per week. This implies that the ‘poverty line’ now lies at £190 per week, well above the average £130 provided to an individual with no other income by the Basic State Pension plus pensions credits.

*Report “Older Workers: Employment Preferences, Barriers & Solutions”, EHRC. Survey of 1,494 UK men and women aged 50-75