CashQuestions - How green is your money?

How green is your money?

09 June 2008

Issues surrounding the environment have moved from the fringe to centre stage over recent years. Along with this has come some confusion over where the boundary lines are drawn, with investors on the whole being content to decide for themselves where green starts and ends.

The demolition of tropical rain forests in South America, the warming of the atmosphere via the ever constant output of carbon dioxide by mankind and the loss of another animal species, are just some examples of why the subject remains as emotive as ever.

Some even question whether the Earth is warming at all, or whether what we are currently seeing are simply natural phenomena, which have always taken place. Then, assuming that global warming is in place, the next challenge is to engage hearts and minds in doing something about it.

Just how we spend our money every day - which of course will ultimately feed through to the share prices of those companies concerned - will have an impact.

Buying a punnet of strawberries which are home grown as opposed to imported, would appear to be doing its bit to reduce harmful environmental gases - avoiding the flight transport from overseas. Equally, just how we invest our money also has potential considerations.

Green and ethical investing is an area which has grown tremendously in recent years. Many investors are keen to see their investments avoid the defence or tobacco industries for example, leaving them free of the concerns which these industries might be inflicting on others.

However, like just about all arenas in life, the lines between perceived right and wrong can blur.

Green funds

On an environmental basis, few other examples would appear to serve the point better than the nuclear industry.

Concerns for the potential issues of safety and disposal of waste products, let alone the positioning of such generation plants, still remain relevant. However, the broader scientific community appears to have come round to questioning whether nuclear power is now one of few methods of power generation which provide a true alternative for the future. It does not generate greenhouse gases such as fossil fuels and it is seen by some as more feasible than say wind or wave generation.

Driving profits

Elsewhere, the transport sector has over recent years been seen as playing its part in polluting the environment.

The airline industry in particular appears to have suffered the brunt of at least any political backlash, with the implementation of added passenger taxes looking to discourage unnecessary travel. However, all methods of transport cannot be labelled as bad for the environment.

The bus and railway operators can certainly be viewed in a green light. Despite their own contribution to greenhouse gases, the economies of scale which work in transporting many passengers as opposed to individuals in their cars are considerable.

Where to invest

For an ever-increasing socially responsible society, the rise in ethical investment can prove to be rewarding financially as well as helping to ease the conscience.

From an investment perspective, the fact remains that investing in this way is restrictive - the strength of the tobacco companies and the arms companies over recent years has continued to defy gravity. As mentioned above, and within these pigeonholes, it can be moot as to whether a company is indeed green - or socially responsible.

As with many areas of investment, a managed fund approach is considered the best way for many private investors to tackle such a diverse and potentially challenging area. There are now a growing number of green and ethical funds available and the debate and potential opportunities which environmental concerns may bring will surely continue to grow and change.

How green is that fund? Use the ethical investment fund comparison tool supplied by Hargreaves Lansdown here.

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