Saturday, January 4, 2014
Nothing is black and white in life and so it should be no surprise to discover that when it comes to Green Investments some are greener than others. Ethical investment funds commonly use a method of screening to choose companies in which to invest. Positive or negative screening approaches are common and used in an attempt to identify the most ethical companies suitable for this type of fund. Methods vary, but generally negative screening focuses on aspects such as environmental issues, human rights issues and social responsibility. It will also screen out firms that are involved in sectors or industries that have negative reputations, such as those in the fossil fuel sector. When it comes to green investments, specifically, this screening approach uses the various shades of green to classify different companies and activities; this helps individual investors identify the type of activity that they are most comfortable investing in.
Dark Green to Mid-GreenFor investors looking for the most positive of green funds the dark green classification will be most suitable. Companies classified in this group are unlikely to be involved in oil and gas industries, mining, the tobacco industry, non-renewable timber production or the arms industry. Many dark green funds will also strongly focus on investing in firms involved in the renewable energy sector, sustainable farming or those which make a positive social contribution. Some funds will focus on sustainability, based on its positive environmental impact, which can allow for a more diverse portfolio.
A Hint of GreenLight green funds can potentially offer a wider investment choice but on an ethical stance may require the investor to be less, shall we say, “choosy”. A fund that has this particular shade may choose to invest in companies that many seeking ethical or green investments may consider ‘shady’. This type of fund will normally invest in all areas of the stock market, but will choose companies that are actively seeking to improve their performance in areas such as social responsibility, human rights or environmental issues. In effect this means that virtually any company, in any sector, could feature at the lightest end of the scale.
Alternative Approaches to Green IssuesFor those looking to invest in Green Funds the distinctions can be subtle and confusing but the choice is growing all of the time. Since the launch of the first green fund over twenty years ago the market has expanded rapidly. At the lighter end of the scale it’s important to understand that companies may be included because they use renewable energy but may still be working in a sector that some green-minded investors would find unpalatable. In addition to the screening approach some funds also take the activist approach – campaigning for improvements in specific areas such as energy emissions, social responsibility or human rights issues. These funds can be attractive because although you may be investing in a sector you are uncomfortable with, fund managers have enough influence as shareholders to create positive change within individual companies and sectors on a broader level.
Bryan James is a good blogger whos interests are sport, the enviroment and gardening, in his spare time he enjoys writing blogs, and has done blogs for companies such as Emerald Knight Consultants.