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Weekend reading: An ethical quandary

What caught my eye this week.

A short while ago the UK blogger DIY Investor [1] wrote passionately about the threat of climate change. He’s now put money into the Impax Environmental Investment trust in part to do something about it [2]:

As I was writing my article on climate change recently, I must admit to a feeling of guilt that I did not hold a ‘green’ fund in my portfolio.

I have some reservations regarding this sector and suspect many funds are not really as green as they make out.

However some are clearly better than others [and] I think that being aware of a potential problem brings with it a responsibility to do something positive.

So, time to make amends.

We get a fair few queries about ethical / SRI1 [3] investing. In response, The Accumulator wrote a big article [4] about it last year, with a tilt towards passive options.

What jumped out at me from DIY Investor’s write-up though was this section from Impax on the happy consequences of buying a big wodge of its shares:

Environmental impact of £10m investment in IEM plc

  • Net CO2 emissions avoided 7,940tco2
    Equivalent to taking 3,940 cars off the road for a year
  • Total renewable electricity generated 2,150 MWh
    Equivalent to 520 households’ electricity
  • Total water treated, saved, or provided 2,340 megalitres
    Equivalent to 18,500 households’ water consumption
  • Total materials recovered/waste treated 1,340 tonnes
    Equivalent to 1,340 households’ waste arising

I am as concerned about the environment [5] as anyone I know. I applaud the aims of both the trust and my fellow blogger.

However I can’t decide whether buying into a trust like this really equates to anything like the impact quoted above.

I’m not doubting the underlying green businesses which it invests in. I haven’t researched them.

Rather, if you buy shares of an investment trust in the open market, you’re simply swapping your money for the shares of someone else. You now own a bunch of companies achieving those lofty targets – but now somebody else does not. Surely it’s a zero sum trade?

It’s only when the fund raises money that new funds will go into the sector.

That’s on the one hand.

On the other hand, the greater the demand for assets like this, the stronger the secondary market and the easier such companies – and funds – will find it to raise money in the future.

So on balance I think owning the fund does no harm and probably a little good – but it would be best to buy into such trusts when they first raise money if you want to make the most impact.

Of course, I own Tesla shares and console myself for putting up with their volatility with the importance I see in its mission.

But then again that electric car / battery / controversy maker will certainly need to raise money again in the future if it’s to achieve its ambitions. Hence its shares really do need all the support they can get.

Do you consider ethical factors when making an investment – and would you feel easier flying to Spain on the back of it?

Let us know in the comments below.

From Monevator

Why would higher bond yields cause share prices to fall? – Monevator [6]

From the archive-ator: Asset allocation rules of thumb – Monevator [7]


Note: Some links are Google search results – in PC/desktop view you can click to read the piece without being a paid subscriber. Try privacy/incognito mode to avoid cookies. Consider subscribing if you read them a lot!2 [8]

Government borrowing in September lowest since 2007 – BBC [9]

Flat rate pension to rise by 2.6% (or £4.25 a week) from April… – ThisIsMoney [10]

…while the pension Lifetime Allowance will rise to £1,054,800 – Professional Pensions [11]

UK house prices rise at their lowest rate in five years, says ONS – Guardian [12]

Jargon-free pensions statement criticised for leaving out fees [Search result]FT [13]

Bumper year for income, with FTSE 100 posting 10% dividend growth – ThisIsMoney [14]


(Click to enlarge)

The demographics of UK home buyers shifted after 2009 – Neil Hudson on Twitter [16]

Products and services

Banks to check account names to beat transfer fraud – Guardian [17]

How can a salary sacrifice scheme boost your pension? – ThisIsMoney [18]

Share incentive schemes: Invest in your employer [Search result]FT [19]

Ratesetter will pay you £100 [and me a bonus] if you invest £1,000 with them for a year – Ratesetter [20]

UK investment trust discounts widen since Brexit vote [Search result]FT [21]

Investment platform AJ Bell grows customer base ahead of IPO – CityWire [22]

The rise and fall of the ethereum crypto-currency [Search result]FT [23]

Comment and opinion

Designing an ETF portfolio withdrawal strategy – Just ETF [24]

A bear market comes bearing gifts for most – Humble Dollar [25]

This is the end – Pension Partners [26]

What is your financial tipping point? – Of Dollars and Data [27]

Actually, maybe you should sell some shares this time [US but relevant]Morningstar [28]

The worst kind of bear market – A Wealth of Common Sense [29]

Nice people have emptier wallets, on average – Scientific America [30]

Shorting pioneer Tom Barton exposed some crazy frauds [Podcast]Meb Faber [31]

The one-word secret of the best investor you’ve never heard of – The Value Perspective [32]

What colour is your parachute? – Simple Living in Somerset [33]

For stock pickers: Has chasing hot stocks stopped working? – The Macro Tourist [34]

For investing nerds: Why seed fund-raising scaled – Robert Bryce [35]

Another for active-eers: More ways to manage equity risk – Flirting with Models [36]


Want a referendum on the final deal? Tomorrow’s London march is for you – People’s Vote [37]

Eggsit means Eggsit – Gary Bainbridge [38]

Brexit and finance – Young FI Guy [39]

Cryptocurrency exchange Coinbase sets up Brexit contingency plan [Search result]FT [40]

Kindle book bargains

A Million Years in a Day: A Curious History of Daily Life by Greg Jenner – £0.99 on Kindle [41]

The Templars: The Rise and Fall of God’s Holy Warriors by Dan Jones – £0.99 on Kindle [42]

You Are a Badass: How to Stop Doubting Your Greatness by Jen Sincero – £0.99 on Kindle [43]

Way of the Wolf: Straight line selling by Jordan Belfort – £0.99 on Kindle [44]

Pay what you want for a bunch of electronic books [Beware all the trading tomes!]Humble Bundle [45]

Off our beat

The life-changing magic of tidying up – Get Rich Slowly [46]

How Netflix expanded to 190 countries in seven years – HBR [47]

It’s okay to feel down for no reason – Raptitude [48]

The bad behaviour of wealth managers’ richest clients – Guardian [49]

Saudi Arabia and the common knowledge game – Epsilon Theory [50]

And finally…

“People who succeed in the stock market also accept periodic losses, setbacks, and unexpected occurrences. Calamitous drops do not scare them out of the game.”
– Peter Lynch, One Up On Wall Street [51]

Like these links? Subscribe [52] to get them every Friday!

  1. Sustainable, Responsible, Impact Investing. [ [56]]
  2. Note some articles can only be accessed through the search results if you’re using PC/desktop view (from mobile/tablet view they bring up the firewall/subscription page). To circumvent, switch your mobile browser to use the desktop view. On Chrome for Android: press the menu button followed by “Request Desktop Site”. [ [57]]