Can investing in green companies bear fruit?

First published in Business: Personal Finance

Jeremy Gates reports on the nation’s money issues and looks at whether green investments could boost your savings and pension

IS it possible to build a long-term savings pot – either as part of a pension or as rainy day money to pay for a grown-up gap year away from work – on the back of saving the planet?

If you only want to put your money in companies which work to the highest ethical standards to save the environment, National Ethical Investment Week this week is for many an obvious moment to take stock.

However, getting your savings to work for good causes is far from easy.

Although governments are spending billions on fighting climate change, many individual shares on the edge of the green sector have had a torrid time: Shanks, a waste disposal company, has seen its share price plunge on the back of eurozone concerns.

If you opt to put your money in managed funds instead, that can be tricky too.

Many funds are so small that you need expert advice to find the best, and financial advisors tend to charge from £100 per hour upwards.

Some managed funds holding a portfolio of shares and even corporate bonds in the green sector, however, have performed reasonably well.

In its latest review, Barchester Green lists Cheviot Asset Management’s Climate Asset fund – up by more than 16 per cent in a year – as a winner among green funds.

Kames Ethical Equity and Kames Cautious Managed are in the top 25 per cent of funds over one, three and five years, while its top ten green funds have returned between 13 per cent and 19 per cent in past 12 months.

The concept of green investing started in 1984 with Friends Provident’s F&C Stewardship Growth fund.

That initial fund, and many imitators since then, say they invest only in companies which meet tightly defined criteria, or can prove their impact on the environment and on consumers is wholly beneficial.

However, fans of green funds point out that a £100 investment in Stewardship Growth back in 1984 is now worth £1,143 – an impressive eleven-fold return over 28 years.

The Stewardship Growth Fund, now holding more than £1bn in its various forms, is managed today by F&C Asset Management.

But ethical investment, though growing fast, totals just over £11bn – a tiny part of the £575bn under management by the UK-authorised funds industry.

Currently, ethical funds with “buy” ratings from Bestinvest include: Aberdeen Ethical World, Jupiter Ecology, Kames Ethical Corporate Bond, Kames Ethical Equity, Standard Life Ethical Corporate Bond and Standard Life UK Ethical.

At AWD Chase de Vere, Aberdeen Ethical World, Jupiter Ecology, Kames Ethical Corporate Bond and Standard Life Ethical Corporate Bond funds are all tipped.

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