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Getting into green: make money from ethical investments (part two)

Renewable energy makes environmental sense and seems to offer a good return

October 24, 2013 | By:

Do you care about where your money is invested, as well as the return? Social entrepreneur Jamie Hartzell explains the benefits of positive investing and how individuals can enter the market

Green investment_tree huggers_620 Corbis

Get a hold on where your money goes, with positive investing

With savings rates at an all-time low and continued nervousness in the financial markets, it can be hard to know where to put your spare cash. If you are concerned about the social and environmental impacts your investments might have, the choices get even harder.

Money is like a teenager. It has a mind of its own and rarely does what you tell it to. You think you know where it is, but then you find out it has been up to all sorts of things of which you do not approve – and has done its best to make sure you don’t find out.

Just as a teenager might turn out to have been out at a late-night party when you thought they were tucked up in bed, you might suddenly learn that your money is helping to cut down virgin rainforest instead of sitting quietly in the vault at your local bank.

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Positive investing is a new way to get your money back under control, and it’s on the up. A recent report by Ethex, charting the full extent, analyses almost 50,000 such investments to draw up a map of the UK hotspots. But what exactly does it mean?

Organic farming, green transport, sustainable forestry 

In a nutshell, it’s about backing businesses that set out to tackle a social or environmental problem at the same time as offering a financial return.

Investments tend to be in areas such fair trade, renewable energy, poverty alleviation, organic farming and food, community shops and pubs, sustainable forestry, green transport and social property.

And rather than putting your money into the hands of a fund manager, at which point you lose sight of it, you invest directly in businesses such as social enterprises, credit unions and community share offers that give you the chance to invest directly in issues that you care about.

What’s more – and unusually – even after they’ve got your cash, the people running the businesses are keen to hear from you. They encourage investors to attend annual general meetings and to get involved.

Investing in renewable energy

Dr Brenda Boardman is an Emeritus Fellow at Oxford University and a world expert on energy policy. She and her husband have invested in a number of renewable energy projects, among them wind farms, solar farms, and solar panels on a local school.

“I want to get closer to my investments, and I don’t want lots of middlemen making decisions on my behalf that I possibly won’t agree with. With renewables that is possible. You can point to them on a map, drive past them if you want to, touch the turbines or the solar panels.

“I’m a great believer that you and I have caused the climate change problem, so you and I as individuals are the solution. We’ve just got to take a step-change in what we do.

“Two of ‘my’ wind farms have been doing particularly well, yielding an average ten per cent return a year. Actually, it wasn’t that windy in 2012, but I mind less when the weather affects my investments than I do the vagaries of the City!”

How to find positive investments

Positive investing used to be hard work. It was extremely difficult to find out about the full range of opportunities available or to be able to compare them, and the investment might only be open for a short period of time.

Also, once you had invested, it could be hard to track and realise your holdings. That is why I set up Ethex, a not-for-profit online stock exchange for positive investments, to help investors find and invest in the growing number of businesses that are creating positive change.

Margaret Rawbone has worked for a global IT company for 15 years, and until recently the only investments she held were in her standard company pension scheme. “I shudder to think what type of moneymaking schemes my pension fund supports,” she says.

“Over the years, I’ve gradually changed my buying habits. Ethex is the first step in influencing my investment habits.”

So, when she made her first independent investment in Ekopia (which invests in community enterprises in West Moray, including affordable housing and a wind park), it was a significant step for her.

Margaret says: “I’m taking baby steps rather than giant leaps. I wouldn’t have had a clue how to buy Ekopia shares if it hadn’t been for Ethex.

“I’m particularly interested in renewable energy, which makes environmental sense and seems to offer a good return. I live in a flat, which means I can’t install my own solar panels, so the idea of being able to invest directly in solar really excites me.”

Of course, positive investments are higher risk than more established investments but, for independent financial advisor James Dickens of Grierson Dickens Chartered Financial Planners, they can form a valuable part of a larger investment portfolio.

He says: “Quite a few of our clients have reached a stage of life where they have enough to cater for their immediate needs, so they are looking for something a little more interesting and productive to do with their money; the chance to give something back.

“We’ve been recommending a small portfolio of positive savings and investments that help to spread the risk. We’re not looking for high returns; staying ahead of inflation will be enough, alongside some impressive social benefits.”

As a worst-case scenario, that can’t be bad: you don’t catch a cold, and you get a warm glow.

● See the figures: ethical fund performances compared to mainstream funds

Jamie Hartzell, 55, is the founder and MD of Ethex and the chair of Zaytoun, which imports fair trade produce from Palestine. He is a life-long social entrepreneur who, 15 years ago, set up social business the Ethical Property Company. Prior to that he was a documentary film producer.