#schoolstrike4climate #fridaysforfuture

When we hear about strikes in the UK, the first thing that comes to mind is the commonly occurring industrial action strikes but now there is another kind of strike taking Westminster, Parliament Square and the streets of many other British towns and cities – climate strikes.

Students join the protest in Westminister. (Image Source: Nick Ansell/PA)

Students join the protest in Westminister. (Image Source: Nick Ansell/PA)

To understand all this better, let us first introduce Greta Thunberg. In her twitter bio she describes herself as a “16-year-old climate activist with Asperger”. When she was younger Greta said to have been shown documentaries at school entailing the disastrous effects of climate change on the environment as well as the surrounding wildlife. These images stuck with Greta and since then she has convinced her parents to become vegetarian, then vegan, as well as urged her mother (a well-known Opera singer in Sweden whose career depends on travelling) to not fly anymore.

More recently, 25 weeks ago to be exact, Greta decided to skip school to protest in front of Swedish Parliament for the fact that adults have failed to protect the future generations from their actions resulting in climate change.

At the recent COP24 summit Greta accuses adults of “stealing their (children’s) future in front of their very eyes”, she also says we need to keep fossil fuels in the ground to not make any matters worse. (Full video of Thunberg’s speech at the COP24 can be found below)

The COP24 or the 2018 United Nations Climate Change Conference took place between the 2nd and 15th December 2018 in Poland. The conference was primarily used to agree on rules to implement from the Paris Agreement that will come into force in 2020.  

Since the climate change agreement summit Greta has been motivating children and students around the world to leave school every Friday, like her, to urge adults to take climate action including transitions to greener energy sources. These strikes were inspired by the school walk outs that took place after the deadly school shooting in Florida on February 14th last year.

Continuing her campaign at the World Economic Forum, Greta Thunberg arrived after a 32-hour train journey, unlike the delegates who reached the forum in Davos, Switzerland by up to 1,500 individual private jet flights.

Greta Thungberg in Davos. (Image Source: Twitter)

Greta Thungberg in Davos. (Image Source: Twitter)

Further taking her efforts to social media where she is able to reach more of younger crowd Greta uses hashtags #climatestrike and #fridaysforfuture, inspiring children to “demand the preservation of their futures”.

The word has spread all over the globe, school children from Switzerland have travelled for 26 hours by train to visit her to ask for her assistance with petitions requesting tougher carbon emission laws in Switzerland. Individual Twitter accounts have been set up for regional youth climate strike action groups spanning from New Jersey (USA), Belgium to India and France, all aiming to have a global school walk out on March 15th involving students from more than 40 countries.  

More than 20,000 students held strikes in at least 270 cities (as at December 2018), all wanting the government “to declare a climate emergency”.

These school strikes have already caused much controversy, Theresa May has slammed young people staging mass walk-outs stating ‘disruption to planned time was damaging to pupils and increased teacher’s workloads’. Other people have taken to Twitter admiring the younger generation’s stance on implementing change, saying that demonstrating in such a protest would not hinder a job application but enhance it.

Students striking in Australia. (Image Source: Mike Bowers/The Guardian)

Students striking in Australia. (Image Source: Mike Bowers/The Guardian)

What are your thoughts on children stepping up for tougher climate targets and reforms?

Greta Thungberg full speech at UN Climate Change COP24 Conference. (Source: Youtube)

5 reasons why you should invest ethically

Consumer demand for ethical investing is on the rise, now almost £13 billion of UK investors’ money now under the management of ethical funds (Investment Association). We’ve put together a few reasons which why this may be happening and why we think you may want to consider investing ethically.

1.       You can decide what your money is financing. If you currently invest in a pension or an ISA there is a very strong chance that your money could be financing, among other things, weapon production, animal exploitation or environmental damage. If the impact that your money may have on such issues matters to you then responsible investing is something you should consider.

2.       You can make a difference. Nowadays investors have a growing choice of funds and can personalize their portfolios to make a positive difference. Impact investing is investing made with the intention to generate positive, measurable and environmental impact alongside a financial return. Here is an example below (ImpactBase)

A European private equity fund invests between several million in companies that provide clean electricity to rural communities in developing countries with limited access to energy. The fund made an investment in a company that provides solar energy for lighting and refrigeration in rural Indian households, schools, and hospitals that have limited access to the main electricity grid. Enabled by this investment, the company has installed more than 40,000 systems and currently offsets 25,000 tons of carbon dioxide emissions.

Some positive criteria which a fund may choose to invest in are: minimising animal testing, environmental management and human rights support.

3.       You don’t have to sacrifice financial returns. For a long time, ethical investing had negative connotations attached to it; more volatility, lower returns, higher costs. Fortunately, a remarkable transformation has taken place as many ethical funds currently on the market consistently outperform their more conventional and established their peers.

In a journal by Friede (Deutsche Asset &Wealth Management) and Busch (University of Hamburg), over 2000 empirical studies on the relationship between ESG factors and corporate financial performance from the past 40 years were aggregate. The journal concluded that 90% of them have found that ESG factors have a positive or neutral impact on financial returns.

4.       It makes sense. Investing ethically provides solutions for environmental concerns in the long term such as global warming and pollution, and investments supporting these tend to hold firm in times of volatility.

5.       Psychic returns (non-wealth motivations). Making a positive difference to the world we live in through your investment decisions can give a feel good factor, just like when you would donate to charity or volunteer. All whilst insuring a hopefully brighter future for now and the generations to come.

Results of client ethical views survey

 

As many of you are probably aware we have a survey on our website entitled ‘What are your ethical concerns?’ We’ve put this up to find out what people’s ethical views are, mostly so we can further understand what funds we should be researching to add to our portfolios to better suit our clients.

The results are as follows:

·         100% of people would be concerned if their pension or investment was supporting animal testing for non-medical purposes, such as perfume or cosmetics

·         100% of people would be concerned if their pension or investment was supporting the intensive farming of animals.

·         100% people would be concerned if their pension or investment was supporting the manufacture of armaments.

·         87.50% of people would be concerned if their pension or investment was supporting climate change/fossil fuels-the extraction and exploration of fossil fuels.

Luckily, all our portfolios are now fully divested. Ensuring that our clients’ pensions and ISAs benefit from all the research and attention you would expect from a wealth manager, whilst helping the transition to a sustainable economy and relationship with the world.

·         87.50% of people would be concerned if their pension or investment was supporting gambling.

·         100% of people would be concerned if their pension or investment was supporting human rights violations.

·         62.50% of people would be concerned if their pension or investment was supporting pornography.

·         88.89% of people would be concerned if their pension or investment was supporting tobacco.

These results are intriguing and help us better understand what clients would possibly want in their portfolios, allowing us to narrow down our research.

We aim to keep these results regularly updated and shared with you to give you a brief look at what other people’s thoughts and ethical issues are.

Our Chartered status

Purposeful.Money have previously achieved Chartered Status and we now feel it is important to explain what this actually means, as it is an important award with significant recognition. 

The status was awarded to Purposeful.Money by the Chartered Insurance Institute (CII) and acts as a kitemark for quality in the eyes of the public being widely recognised as a symbol of trust. 

This recognition is more important nowadays as quite rightly consumers are more demanding than ever before. Understandably they expect to deal with Financial Advisers who can provide first class service, advice and support. Independent research has shown that consumers recognise the Chartered status as a symbol of professionalism and excellence.

What does the charter mean though and why is it such a symbol of excellence?

Essentially, Chartered Status enables us to be able to demonstrate our professional commitment to raising standards of knowledge, capability and ethical practice.  It lets our clients know that they will receive the highest levels of service from us.

Any client who engages the services of a Chartered Financial Adviser can expect the highest level of qualifications to have been achieved along with the highest standards of professionalism.

Royal Charters date back as far as the 11th century and can cover bodies such as Universities, Charities and professional Institutions.  On the advice of the Privy Council a Charter is awarded by the Monarch of the time.  These are granted in rare circumstances and in general terms is only done so where there is a convincing case that it is in the public Interest to provide Government oversight of the body and where a profession is able to demonstrate a track record of achievement over a number of years.

Once a professional body is granted this Charter they are then able to grant ‘Chartered Titles’ to individuals and firms which meet strict qualifying criteria.  In our circumstances the CII, who were granted its Royal Charter in 1912, must uphold the rules of its Charter and in turn the holders of the Chartered titles such as Purposeful.Money must comply with their Code of Ethics

Chartered Status brings with it some serious obligations on the part of the adviser.  We are required to ensure that our advice and ongoing support is:

  • Of the highest quality

  • Based on the client’s researched needs

  • Provided by someone operating within their level of competency

Advisers must meet these requirements in a number of ways:

  • A commitment to professional development, including attaining the highest qualifications

  • An adherence to continual professional development that is evidenced to the CII.

Even though the Royal Charters are a British Institution it is widely recognised outside of the UK as well.  Being able to demonstrate an ongoing commitment to professional development is a set of values that is recognised the world over.

CII_Strapline_Standard_DarkGrey.jpg

At Purposeful.Money we are proud to have achieved the status of Chartered Financial Advisers and continually strive to meet the code of ethics and standards of professional qualifications set by the CII.  Our core objective is to offer clients an opportunity to invest their money in a more socially responsible manner in order to help achieve positive benefits in the world.  We believe that the ethics and values required to maintain the Chartered Status are in perfect accord with our own principles of integrity and trust.

Palm Oil, good or bad?

Palm oil is a vegetable oil that is produced by simple steaming and pressing (Palm Oil Health), much like how olive oil is produced. Global consumption has risen from 14.6 million tonnes in 1995 to 61.1 million tonnes in 2015 (EPOA). This vegetable fat can be found in 50% of packaged goods, baked goods, cosmetic and cleaning products in supermarkets (Rainforest Rescue). Even though palm oil is widely popular it might be a bit tricky investigating product labels for a direct reference as it comes under various names, a few being: vegetable oil, vegetable fat, sodium lauroyl lactylate/sulphate, hydrogenated palm glycerides, ethyl palmitate, octyl palmitate, palmityl alcohol, palm kernel, palm kernel oil, palm fruit oil, palmate, palmitate, palmitic acid, palmitoyl oxostearamide, glyceryl, stearate, sodium lauryl sulfate or sodium palm kernelate.

The popular ingredient needs hot and moist conditions to thrive in. Conditions that are commonly found in rainforests, more specifically within 10 degrees north or south of the equator. Malaysia and Indonesia account for around 90% of the entire world’s palm oil production (Palm Oil Investigations). Why is it so popular you might ask? One reason is its ability to maintain its properties even under high temperatures, as the highest-yielding vegetable crop it produces up to 10 times more oil per unit as compared to soya beans and sunflowers (Earth and World). It also requires less than half the land required by other crops to product the same amount of oil, making it the cheapest vegetable oil in the world.

Even though palm oil has very recently come under scrutiny as Iceland released their Christmas advert and it was banned from the UK as it was ‘deemed to breach political advertising rules’, the debate on whether it’s good or evil can be dated back on the web to 2011.

The banned advert has had about 30 million views over social media streams. (Image Source: PA/Greenpeace)

The banned advert has had about 30 million views over social media streams. (Image Source: PA/Greenpeace)

The Iceland advert was originally produced by Greenpeace, it shows a cartoon orangutan mourning the loss of its home, a forest, that was wiped out to make way for palm oil plantations. Just like Brazil is clearing hectares of its rainforests to make way for cattle ranching, countries with optimal conditions to grow palm oil are doing the same. The WWF states that up to 300 football fields of forest are cleared every hour to make room for palm plantations.

This sensitive video has led to many questioning their unconscious usage of products featuring palm oil derivatives, is there a way to curb our thirst for it and use other more sustainable products?

It is said that in the past 10 years, the orangutan population has decreased by 50% as the result of habitat loss from the forest clearing for palm plantations (The Orangutan Project), at this rate many experts have estimated that orangutans could become extinct in the wild in less than 25 years. Not only are orangutans a victim of deforestation, but there are around 300,000 different animals found in the jungles of Borneo and Sumatra. These animals are being killed, injured and displaced due to the clearing of forests, they’re also at a higher risk by poachers and wildlife smugglers due to the increased accessibility. Apart from the impacts on wildlife, lies the impact on the environment- deforestation to make way for the palm plantations puts a huge strain on the biodiversity of the forests and ecosystems in the country. The ‘most efficient’ removal of the native forests is by burning invaluable timber, which releases vast quantities of fumes into the air- making Indonesia the third highest greenhouse gas emitter in the world.

Smog engulfs the forest as an annual slash and burning starts. (Image Source: CNN)

Smog engulfs the forest as an annual slash and burning starts. (Image Source: CNN)

Wildlife and animals are as greatly affected as the local communities, indigenous communities have witnessed the government hand over their land to private companies and have subsequently become laborers on their own land. This dilemma dates to 1967 but started to get worse towards the late 1990s as locally elected officials began to exercise virtually total control of land allocation and used it to facilitate access for plantation companies that didn’t abide by environmental warnings or regulations. The problem here might not be so much palm oil as a crop but instead its profitability and the multinational companies that want to take a bite out of this profit.

As soon as Iceland’s advert went viral, several petitions popped up on the web urging people to join in the collective boycotting of palm oil and all its derivate products. While this seems like an understandable stance, there has been a lot of talking that this could bring more harm than good to the forests of Indonesia and like countries. A report published by the International Union for the Conservation of Nature stated that blacklisting palm oil would ‘just shift losses to wildlife and animals instigated by agriculture’, instead of reducing them. If palm oil was completely boycotted then we would need another vegetable oil to replace it and meet the vast global demand that comes with it, this would be even more devasting on rainforests as palm oil plantations would need to be eradicated to grow another crop which will yield much less product and require far more pesticides and fertilizers, This dilemma can be almost be mirrored to our problem with fossil fuels- our energy demand is ever-growing, it’s relatively easy to obtain and efficient through fossil fuels and we know its damaging our planet and that there are other options we should take, but right now they’re not very viable (e.g. solar power, which is  not yet economically viable as it’s expensive and relies heavily on government assistance.)

 ‘If all palm oil production was regulated and sustainable, would it be okay?’

The definition of ‘sustainability’ can differ from person to person, let alone from nation to nation. Even though organizations such as the Roundtable on Sustainable Palm Oil (RSPO) strive for transparency so that their growers are RSPO certified, it’s a very difficult thing to ensure- a lot of farmers just tend to a few hectares and sell bunches of the palm oil fruit for cash to traders. This is just one of 8 principles that the RSPO expects from growers, so one can imagine how challenging it must be to perform well against all of them put together. Greenpeace released a report in 2013 that demonstrates that the RSPO wasn’t producing anything close to truly sustainable palm oil and the Roundtable was in-fact certifying forest destruction mainly through slash-and-burn approaches to clear forests. In June 2018 new research was published in Environmental Research Letters comparing environmental, social and economic performance between certified and non-certified plantations, concluding that there was ‘no significant evident to suggest RSPO was better in achieving any of those metrics compared to non-certified plantations’.

As the world population is growing, so is the demand for this vegetable oil which means its production needs to be stepped up – this would expand the reach of organizations such as the RSPO if all palm oil were to be regulated, which so far haven’t been able to stick to what they promise.

So that leaves us as in question as before… what are your thoughts on palm oil?

Let us know!

Budget 2018. Purposeful.Money's Key Notes

In his third Budget Phillip Hammond has heralded that the era of austerity is now finally coming to an end – Note the careful language that he has used here, he has not said that austerity is over but ‘coming to an end’! He has also discovered that he had more money to play with than he had expected.

 

The Overview

The dramatic improvement in the outlook for the UK’s public finances gave the chancellor enough leeway to fund previous government pledges of extra money on the National Health Service and housing without big increases in taxes.

Borrowing has persistently come in under forecast. The OBR (Office for Budget Responsibility) expects borrowing to be £11.6bn lower than forecast at the Spring Statement.

But, with so much uncertainty in the air, economic growth remains anaemic by both historic and international comparison. The OBR now expects the economy to grow by 1.6% next year, 1.4% in 2020 and 2021, before picking up to 1.5% in 2022 and 1.6% in 2023.

The proposed digital tax is a political statement but won’t be the sales tax that might have affected UK internet businesses. Duty was frozen on beer and spirits (instead of increasing as it did for wine) which is good news for pubs.”

Aside from an increase in the tax-free personal allowance and higher-rate tax threshold there were no major tax announcements for individuals. This makes it an opportune time to make the most of valuable tax allowances, reliefs and exemptions that already exist – especially as this could be a short-term window of opportunity, with just five months to go to Brexit.

What are the key Purposeful notes from the budget

 

Plastics tax

A missed opportunity!

The Government will impose a new tax on the manufacture and import of plastic packaging that contains less than 30% of recycled plastic.

Disappointingly there will be no special levy on disposable plastic cups.

The Chancellor has reiterated previous comments that the UK must become a world leader in tackling ‘the scourge of plastic littering our planet and our oceans’. Mr Hammond stated that there are ‘billions of disposable plastic drink cups, cartons, bags, and other items are used every year in Britain. Convenient for users but deadly for our wildlife and our oceans’. These are sentiments that we at Purposeful.Money fully endorse.

It is sad that this commitment did not extend to a so called Latte Levy which had previously been suggested as a means of dealing with the country’s disposable cup waste. 

2.5 Billion cups are being thrown away every year. (Image Source: Acre)

2.5 Billion cups are being thrown away every year. (Image Source: Acre)

The latte levy which was first floated by the Environmental Audit Committee would constitute 25p being added to the price of each coffee to encourage the use of reusable alternatives and also provide a fund for proper waste management.

Mr Hammond stated however that ‘I have concluded that a tax in isolation would not at this point deliver a decisive shift from disposable to reusable cups’.

It is important to note however that in 2015 the government added a 5p charge to plastic bags, a move that appears to have cut the sales of these bags by 86% and therefore seen fewer entering the environment.

There have been many calls therefore for the government to repeat this success with coffee cups and plastic bottles.

Greenpeace Executive director John Sauven said ‘Three weeks since the world’s leading climate scientists said government have just 12 years to turn the tide on the catastrophic and irreversible consequences of climate change the Chancellor has delivered a budget that reads as though he has missed the memo’

It does look as though when we are currently in the middle of a plastics pollution crisis the Chancellor has failed to take even a small step towards reducing the usage of single use plastics by not introducing a tax on disposable coffee cups.

 

Pensions

Pension tax breaks are safe…. for now!

This is despite the Chancellors recent gripes that the bill for pension’s tax relief is ‘eye wateringly expensive’.

This statement prompted many to think that he could be about to do something radical with pensions. So, it will have been a good news for many savers that he had little to say on this subject.  It has been a relief that the popular ‘perk’ which allows everyone to save into a pension from untaxed earnings  has remained untouched despite the bill being £39billion a year to the Government.

Specifically Mr Hammond did not cut the tax-free annual savings limit, or introduce a flat-rate of tax relief as had been feared.

The annual allowance – the maximum that most savers can put in pension pots each year and enjoy tax relief has also been left intact despite fears it could be reduced from £40,000 to £30,000.

The Lifetime allowance however for pensions will rise in line with inflation from the current £1,030,000 ceiling to £1,055,000 in April 2019.

The Chancellor’s comments on how expensive the current system is could however mean that the current pension tax reliefs are on borrowed time.

Inheritance tax

Earlier this year, the chancellor asked the Office of Tax Simplification to review the level of complexity in the current inheritance tax system. Its report is due this autumn, and Mr Hammond had nothing to say on it in the Budget.

Once again, given the interest the chancellor has expressed in the subject, and the possibility that there could be changes ahead, it makes sense to make the most of the existing allowances while you still can.

You don’t have to wait until death to pass on wealth – as most people do. Transferring wealth while you are alive can have a transformative effect on your family’s life and reduce an inheritance tax (IHT) liability.

There are a number of annual gift allowances which you lose if you don’t make use of them before the tax year end. For example, you can give away £3,000 each year and this will not be subject to IHT. You can give as many gifts of up to £250 per person as you want during a tax year, as long as you haven’t used another exemption on the same person.

If a gift is regular, comes out of your income and does not affect your standard of living, any amount of money can be given away and ignored for IHT. It is also possible to make further tax-free gifts – potentially exempt transfers – but you have to survive for seven years after making the gift to get the full benefit of it being outside of your estate for IHT purposes.

Income tax and ISAs

The Chancellor announced that from next April people will be able to earn £12,500 a year tax free and furthermore not pay 40 per cent tax until they have reached earnings of £50,000.  This increase has taken place a year earlier than planned.

This makes the tax-advantaged savings available in an ISA even more valuable. Investment returns are tax-free in an ISA. That means there is no income tax or capital gains tax (CGT) to pay – whether those returns come in the form of interest, dividends, or shares going up in value.

This tax year adults can put up to £20,000 a year into ISAs (so for a couple that is £40,000) and up to £4,260 a year into a Junior ISA for a child. The adult ISA annual subscription limit for 2019-20 will remain unchanged at £20,000. The annual subscription limit for Junior ISAs for 2019-20 will be increased in line with CPI to £4,3685.

Remember:

When you look to utilise your allowance in a stocks and shares ISA consider whether the investment also meets with your ethical values and concerns. 

Purposeful.Money can offer you advice to ensure that your ISA or pension is invested in funds where these important considerations are taken into account.

(Image Source: Which?)

(Image Source: Which?)

Other Key Points from the Budget

  • Stamp Duty abolished for all first time buyers of shared ownership properties valued up to £500,000, applied
    retrospectively to the date of the last budget.

  • A freeze on beer and cider duty for the next year and a freeze on spirits duty, saving 2p on a pint of beer, 1p on a pint of cider and 30p on a bottle of scotch or gin.

  • National Living Wage will rise in April from £7.83 to £8.21

  • New Millennial railcard available by end of year

  • Income tax personal allowance threshold to rise to £12,500 at the same time from April 2019

  • Higher rate tax threshold to rise to £50,000 at the same time

  • Counter terrorism police to get an extra £160 Million fund 2019/20

  • A one off £400 million payment to schools to allow them to ‘buy kit’.

  • An extra £1 billion for the MOD

  • Business rates bills curt by one third for the next two years for all retailers in England with a rate able value of £51,000 or less, delivering an annual saving of up to £8,000 for up to 90% of all independent shops, pubs, cafes and restaurants.

  • Start-up loans funding to be extended to 2021.

  • The Private Finance Initiative PFI and its successor PF2 abolished for future government projects

  • UK Digital Services Tac to be introduced in April 2020 targeting On-Line giants with more than £500 Million in global revenues.

  • Freeze of fuel duties for ninth consecutive year

  • An immediate £420 million payment to tackle potholes, bridge repairs and other minor road works – Good news for cyclists!

  • An extra £1 billion over 5 years for the Universal Credit benefit programme.

 

Good Money Week: Why our portfolios are now divested

In light of Good Money Week we wanted to explain why our portfolios are now fully divested.

It is a fact that there are a growing number of people who are aware of, and want to fight against, man made climate change. It is also a fact, that most pensions and Stocks and Shares ISAs contain funds which invest in fossil fuel extraction or exploration companies due to the simple fact that they historically have provided excellent returns. I’ve spoken to clients who donate money each month to charities such as Greenpeace, and at the same time hold money (without realising it) through their pensions, in Shell and BP!

We’ve been wanting to provide a solution to this problem for some time. The problem for us wasn’t necessarily a lack of time, knowledge or inclination, but more a lack of choice! For example, winding the clock back only a few years, I could only find one fund which had a clear, checkable policy on excluding fossil fuel stock. One fund of course is not enough to make a portfolio! Our aim as wealth managers is to ensure that client money is diversified, can be tweaked according to changes in performance, cost, the emergence of new funds, risk and so forth. We have been checking the market place continually since that point, and, happily for clients and for the world in general, there seems to have been a rather swift change of direction in the market. We’ve seen numerous new funds launch, matched by clearer exclusion policies for existing funds.

Image Source: Finance Matters

Image Source: Finance Matters

We now offer portfolios which are 100% free of fossil fuel extraction and exploration companies to suit every category of investment risk. A divested range of portfolios such as this is something we believe to be unique in our sector and has taken years of ongoing research and gradual improvements to work towards, with continued effort required to maintain and develop the proposition.

You might ask yourself why we believe that fossil fuel investment should be avoided?

Firstly, we consider the overwhelming scientific consensus that man-made climate change is real, and is a result of our carbon emissions to be a compelling reason not to support the industry on ethical grounds. Climate change is causing problems in a range of areas where it is not yet perhaps given full credit. A warmer climate is leading to more extreme weather events and destabilized seasons which can lead to turmoil for farmers and our food resources. As well as the humanitarian issues; we are losing land- with trillions of dollars of real estate around the world is on coastlines and directly at risk from a rising sea level, and animals such as polar bears, coral and turtles.

Image Source: Forbes

Image Source: Forbes

Secondly, and removing any ethical, moral or political arguments, we have the risk of the ‘Carbon Bubble’. At the recent Paris Climate Agreement (COP21), 195 nations agreed to various measures to ensure that global temperatures did not exceed 1.5 degrees centigrade above pre-industrial temperatures, as it has been accepted that we will experience an environmental catastrophe if we go much beyond this. We now have a legal obligation to reduce the level of carbon emissions at a national level. This means that significant assets currently making up the balance sheets and therefore the valuations of fossil fuel companies, can never be extracted and turned into money. This means that right now, many of the world’s largest companies, whose shares are owned by most of the worlds investment and pension funds, are significantly overvalued. We do not consider this a worthwhile risk to take, especially when you factor in the growth, and potential growth available through their competitor industries in the clean energy generation sectors.

If you also believe in avoiding fossil fuels we can check your pension or ISA for them, and if necessary help you ensure that your money is no longer supporting the fossil fuel industry, or indeed at risk from it!

Debunking the myth of poor performance from ethical investment

There was a time, in the not too dim and distant past, when considering whether to invest in an ‘ethical’ fund may well have been a similar thought process to deciding whether or not to donate money to a charity. Ethical investing was an option only suitable for the ultra green, ultra ethical, ultra adventurous investor and the thought of ‘doing good’ would have more than likely been a more powerful driving force than the usual fear/greed considerations which we all go through when considering investing our hard-earned cash. Options were limited, confusing and they were notably more expensive. Options depended too much on only a few factors, government subsidies for example.

Possible investment issues people can avoid through investing ethically (from top left to right): armaments, intensive farming, extraction of fossil fuels and gambling.    (Image sources: National Defence Industrial Association,    www.ndia.org/divisions   ,    www.chickens.allotment-garden.org   , Keyword Hungry,    www.keywordhungry.com   , Casino News Daily, www.casinonewsdaily.com)

Possible investment issues people can avoid through investing ethically (from top left to right): armaments, intensive farming, extraction of fossil fuels and gambling.

(Image sources: National Defence Industrial Association, www.ndia.org/divisions, www.chickens.allotment-garden.org, Keyword Hungry, www.keywordhungry.com, Casino News Daily, www.casinonewsdaily.com)

I can remember clients coming to me for advice, describing themselves (fairly, in my opinion) as ethical, or socially responsible. When we came to look at the infamous ‘past performance’ of the ethical options I would present them with, in comparison to ‘standard’ funds, the social responsibility and ethics they felt so strongly about suddenly became less of a driving force in their thinking. There were clear ‘danger signs’ all over the place… more volatility, lower returns, higher costs. It was very difficult to advise anyone to put their money into ethical funds, on the basis of performance alone, as opposed to standard funds.

Fortunately for ethically minded investors and the world at large, a quite remarkable transformation has taken place in this part of the investment universe. Where previously, there simply were not enough ethical funds available to put together and maintain a portfolio, now we can assemble portfolios of funds which to varying degrees take ethics, corporate governance, sustainability, environmental impact, and social responsibility into consideration when selecting the stocks which drive performance.

The chart below gives a good illustration of what an ‘ethical investor’ could have achieved over the last ten years. We’ve used the Bank of England Base Rate, and the Halifax Property Index as well as our own ‘Medium Risk Portfolio’ and benchmark to give some context. It is important to point out that none of this data should be in any way relied upon as a guarantee of similar future performance, but it gives a clear illustration that investing ethically does not necessarily mean compromising on risk or giving up a good return in the way that it previously did. Your money can be put to good use for yourself and for the wider world.

Comparison of our own ‘Medium Risk Portfolio’ (Green) and benchmark, with the Bank of England Base Rate and the Halifax Property Index (2008-now).

Comparison of our own ‘Medium Risk Portfolio’ (Green) and benchmark, with the Bank of England Base Rate and the Halifax Property Index (2008-now).

As more and more people become aware of the problems facing society and our environment, demand is increasing for ethical solutions to all aspects of our day to day lives. Investments and pensions are no different. This is driving more and more fund houses and wealth managers to either bring these concerns into their existing fund processes, or to launch new funds to meet demand. We expect ‘ethical’ investing to become mainstream within the next few years, and there is certainly no longer a need for us to equate ‘doing good’ with sacrificing returns. Our portfolios are now 100% divested of fossil fuel extraction and exploration companies, something we could never have achieved even a couple of years ago. Your pension or ISA can now be ‘doing good’ for yourself and for the wider world.

We're now 100% divested from fossil fuel extraction and exploration

I’ve always thought that ‘bubble’ was quite an inadequate word for describing a market force with the power to destabilise the global economy. However, the imagery attached to the word works, we can picture the bubble getting larger and then bursting, then… the comparisons end. When a soapy bubble bursts, it just simply ceases to be, but the other kind? Well, you will probably remember the sub-prime mortgage bubble bursting? The immediate aftermath saw the collapse of Lehman Brothers bank, panic in most financial markets, job losses, central banks and governments in chaos and vast sums of money effectively being sprung out of nowhere, generated into the system through quantitative easing in order to stave off the end of the world. We’ve had years of austerity in the UK, impacting millions of people who had never held an investment or mortgage or product which had directly supported the sub-prime mortgage market. The Bank of England alone created £435 Billion through its QE programme as a response to this bubble bursting. For context, that is £435,000,000,000, enough money to build over a thousand new hospitals!

Economists justifiably refer to it as the worst financial disaster since the Great Depression of the 1930s. Quite a bubble. 

And all of this happened due to a breakdown in regulation and oversight combined with the natural phenomenon of human greed playing out in a relatively small sector of the market. Since it happened, measures have been taken to prevent it ever happening again. Banks can no longer hurl money at people who would never be able to prove they were capable of making the repayments. Levels of cash being held by banks has risen to ensure that central banks will not need to bail them out. The mortgage process from start to finish came under intense scrutiny for years. And yet… As is so often the case, we learn a hard lesson and fail to apply that learning more broadly. Hindsight is a wonderful thing, and usually very badly applied. We want the good times to continue, so we carry on doing specific things which ‘work’, until those specific things stop working.

Which leads us to carbon.

Oil pumps (Image Source: Museo Fisogni)

Oil pumps (Image Source: Museo Fisogni)

One way of looking at this is that ‘everything is fine’. Most pension funds invest in gas or oil or other forms of fossil fuel and it makes sense as to why they are - it costs much less to extract than what it sells for, and there's profit to be made at every step along the supply chain. This is how it’s always been. You could go so far as to say that our entire economy would grind to a complete halt without a supply of oil. Not only are we dependent on it, we’ve been heavily dependent on it for decades. It’s an ingredient in plastic. Its energy helps us produce everything. It helps us transport everything. 

It is a very much larger part of our lives, our economies and our investments than the sub-prime mortgage market ever was. 

And yet there is now a scientific consensus that our use of fossil fuels will destroy the ecosystems which support our existence on this planet. Unless we make swift, large scale changes in how we go about our lives, we are possibly not going to have a future as a species. This is a very uncomfortable thought and since we are not seeing the consequences (or not enough of us are) yet, because things have not actually broken down and because the bubble has not yet burst, we are ignoring the problem. The problem is even more difficult to deal with because it is still providing heating but also profit for us. We are addicted to fossil fuels on one hand, and inert, either through our laissez faire nature or fearful avoidance of contemplating the sheer scale of the problem on the other.

This, however, does not mean the problem is going away, or that the bubble will not burst.

Perhaps now would be a good time to explain why we are referring to a ‘carbon bubble’, and why in some ways this offers a glimmer of hope.

As we’ve alluded to, the investment world is welded to the world of fossil fuel exploitation in a way which is incomparable to most other asset classes. If you look ‘under the bonnet’ of almost any pension in the UK for example, you will find shares in more than one oil company. Your own pension, wherever it is held, is unlikely to be an exception. It would be fair to say that there are thousands of people in this country alone, who’s professional lives are spent watching, analysing and commenting on the price or movement of fossil fuel assets. People in the financial services industry, like us, know very well what sort of factors have what effect on what asset. It’s not rocket science, you do not need to be an economist to predict what will happen to the price of a product if, for example, a rival company comes up with a demonstrably better equivalent product. 

We refer to a carbon bubble because we know that our use of fossil fuel cannot continue as it has done in the past, yet it continues. We understand that if the assets (oil fields, coal mines etc) which currently exist on the balance sheets of fossil fuel companies are monetised, the global climate will be pushed above a threshold where our survival is possible. We know that clean energy sources are becoming cheaper and more efficient with each passing week. In other words, we know that change must happen. 

An off shore oil rig (Image Source: Steve Ringman/ The Seattle Times)

An off shore oil rig (Image Source: Steve Ringman/ The Seattle Times)

We see three potential outcomes. Firstly, no change in our behaviour, we carry on exactly as we are until it is too late, at which point the value of investments will no longer be a priority for anyone. We’ve seen tiny examples of how powerful a small change in global climate can be. It has resulted in floods, fires, hurricanes, water and food shortages which has displaced millions of people, led to conflict between nations and shaken the insurance industry. Larger changes will be cataclysmic. The second potential outcome is that the bubble bursts. Potentially we have enough time to address the climate problem, but the realisation of this and action comes too late, and much too swiftly to stop a huge economic collapse. It is estimated that $20 Trillion of fossil assets which we already know about, need to stay in the ground for human life on the planet to continue. If this is accepted by the markets in a sudden, panicked reaction to a final admittance that man-made climate change is real, the infamous bubble will burst. The recent sub-prime mortgage bubble will be a picnic by comparison. When credit dried up, we were able to replace it with money from nowhere, despite the ensuing problems.  The same rules do not apply to a tangible asset which is present in almost every good and service we consume.

The third way is to begin a global move away from a reliance on fossil fuels, as swiftly and smoothly as possible. This move will need to take many forms. From switching to renewable energy for our cars, homes and businesses, to cutting our reliance on plastic, to sourcing more of our food and goods at a local level. Every part of our modernised way of life will need to move within the parameters of the natural world, and we have to admit this. Clearly, this is the preferable option, and even more so clearly, we are not ready for it yet. One way of beginning to speed up the transition to a sustainable, carbon neutral economy/existence is to move money directly away from damaging areas such as fossil fuel exploration and extraction. This will have two immediate positive impacts for the planet. Firstly, less ‘bad stuff’, secondly, more chance of the money being used to find and improve alternative solutions which will speed up the positive change. From an investors perspective (and anyone with a pension is an investor), you can safeguard your money from the potential bursting of the carbon bubble, and help bring about positive change, simply by ensuring that your pension is not still deeply involved in fossil fuel exploration and extraction.

Our portfolios are now fully divested, ensuring that our clients’ pensions and ISAs benefit from all of the research and attention you would expect from a wealth manager, whilst helping the transition to a sustainable economy and relationship with the world.

Divestment protest in Oxford (Image source: Climate Change News)

Divestment protest in Oxford (Image source: Climate Change News)

For more than one reason, now might be a good time to check where your pension or ISA money is actually invested. You can contact us today for a no obligation conversation about how we might be able to help you, and you might be able to help the wider world.

How to Help Turn the Tide on Plastic Pollution

As a global economy we have become addicted to plastic since its emergence in the 1960s. Over the last ten years we have produced more plastic than during the whole of the last century. (Eurostat, 2015) It is ever present, and covers almost everything we buy. Unfortunately, it’s almost ever present even after we’ve used it, and is beginning to cover and choke the systems which sustain us. It is said that one garbage truck of plastic ends up in the oceans, every minute. (World Economic Forum) More and more people are aware that there is a problem, and that they are contributing to it. What can we all actually do about it? In the absence of leadership at government level the rest of us must step up and begin to turn the tide on plastic.

Laysan Albatrosses, “A chick can have an ounce of plastic in its belly and remain healthy; the dead chicks have twice as much.” (Image Source: Chris Jordan, Ocean)

Laysan Albatrosses, “A chick can have an ounce of plastic in its belly and remain healthy; the dead chicks have twice as much.” (Image Source: Chris Jordan, Ocean)

Due to the fact that plastic can take up to 500 years to decompose we can all try using less whenever this is an available option (Recycling Guide). Think of your day-to-day life, where can you cut back on plastic? A reusable coffee mug and water bottle? Bring your own bags to the supermarket? If permitting, instead of shopping at multinational supermarkets that cover everything in plastic, why not try your local fruit and vegetable market- not only is their produce not suffocated in plastic and probably organic, but you’re also contributing to your local economy. To try and look at it in perspective, think of the difference even a small change like this will make… For example, one cup used over and over instead of hundreds throughout a year... If society begins and maintains acting collectively with each person doing their little bit, then the effort will be multiplied and this results in a bigger change!

Landfill filled with plastic waste (Image Source: Shuttershock)

Landfill filled with plastic waste (Image Source: Shuttershock)

If you want to be more proactive, there are numerous lobbying groups and campaigns which you can join, being part of a team that are like-minded will help keeping the positive messages going and inspire others. Greenpeace, Avaaz, Friends of the Earth to name but a few are always looking for more people to help spread the word on using less plastic and other green ways of living.

Another problem with plastic is that it is not just about pollution, and the fact that we are strangling the environment with our discarded single use plastics… It’s also that we use huge amounts of fossil fuels to make them in the first place. Why we find it acceptable or normal to act in such a wasteful fashion is probably a topic for another blog, however, at this point we would like to shed some light on another way that you personally could help turn the tide.

Grey whale in net, “Marine mammals like whales often mistake marine debris for a potential food source.” (Image Source: Environmental Impact Assessment)

Grey whale in net, “Marine mammals like whales often mistake marine debris for a potential food source.” (Image Source: Environmental Impact Assessment)

If you own a type of financial instrument, for example an ISA or a pension, there is a very good chance that within the investment hidden behind the name of the fund- you own all sorts of stocks and shares in companies that you might have wanted to avoid. Oil and gas companies, tobacco companies, weapons manufacturers make up disproportionately large chunks of the investment world as they have always generated money for the owners, the shareholders. However, there are many other ways to increase your wealth, and lots of these can actually have a positive impact on society and the environment! If you have made the effort to buy reusable coffee mugs and water bottles, take your own bags to the supermarket, perhaps even helped with a litter pick-up, why not take a closer look at what the money in your pension is supporting?

We are here to help shed light on how investments and pensions work, and how yours could become a real force for good with considerably less exertion on your part than a day picking up litter in the park!

Here are some more scary facts about plastic use!

  • Each EU citizen creates an average of 31kg of plastic waste per year (Source: Eurostat, 2015)

  •  The European country creating the most plastic waste per citizen is Ireland, with an average of 61kg thrown away each year (Source: Eurostat)

  •  A plastic bag has an average “working life” of 15 minutes, however its estimated that 4 trillion plastic bags are used annually worldwide (Source: Plastic Ocean)