INNO Cellulose — a Natural Air Conditioner that Saves Money and Mother Nature A common misconception is that environmental products are very costly. People may not consider environmental friendly products because there are cheaper alternatives available. However, not all products that can help to improve your wellbeing and preserve Mother Nature are just expensive ‘green’ indulgences. Keeping Cool in Hot Times One Material, Many Advantages First Reduce, Then Recycle! Quick facts on Cellulose Ï Natural Air Conditioning Free of Charge Ï Ï Ï Ï G+ G+ BEYOND GREEN MAY/JUNE 2009
FINANCE Is Green a Grey Area? Financial Adviser Brett Waller, says that when you decide to invest in green projects you should not forget basic investment fundamentals. It just may be possible to save the environment by investing into green projects such as clean technologies, alternative energy, ocean water desalination, low and zero emission motor vehicles and so on. The list goes on. Indeed, investors have taken to investing in environmentally friendly firms with gusto. The questions that must be considered include what are the risks to investors’ money, how does one select a viable green project or mutual fund and are investors likely to be rewarded through competitive returns? SociallyResponsibleInvesting Green investing is a form of ethical investing or socially responsible initiatives (SRI). There are many forms of SRI, which dates back to the 1800’s when Quakers refused to do business with companies which profited from slave labour or war. Today the range of SRI opportunities include: • Exclusion of certain sectors e.g. gambling companies, weapons manufacturers, tobacco related stocks, drug related companies. • Inclusion of certain sectors e.g. renewable energy, desalination, recycling, water source heat pumps. • ‘Best-in-breed’ approach where firms/industries are sought out for economic, social or sustainable practices. Certainly, green investments fall within the gambit of SRI. However, whether you go green or not will be determined by why you are ultimately investing. It may be for altruistic reasons. As long as you are comfortable with the risks in relation to earning an early profit this could be regarded as speculation and not really a strategy that could be endorsed. However if your strategy is long term investing into companies with strong environmental policies which could result in the sustainable evolution of our planet whilst being economically viable, then that is a different story. RISK There are risks associated with green investing; the same as there are risks in investing outside of SRI. • Substantial upfront costs e.g. wind and water projects. Undercapitalised companies have a greater chance of failing. • Fossil fuel prices, when high, promote green alternatives but as we have seen recently, with the plunge in crude oil prices, for example, this has tempered consumer desire to look at hybrids or alternative bio-fuels as serious contenders. • The fundamental principles of investment were not always followed as investors have rushed in to whatever was ‘sexy’. Nevertheless green investing appears to be here to stay. There is a growing awareness of climate change which is becoming a major political issue globally. There are new markets being created in response to changing consumer sentiment or indeed to growing government regulation — companies seizing the green initiative will be well rewarded provided they are in it for the long haul. Add to this unprecedented global government support for developing clean technologies, green investing could flourish as a viable long term investment. InvestmentFundamentals Environmentally friendly companies need to be looked at in the same light as we have traditionally done for other types of investing. • Do your homework — make sure the companies you invest in are able to make a profit. • Be patient— green investing is not a short term proposition. In addition, green services and products are often more expensive than their conventional counterparts so the break-even point is further away on a time scale. • Diversify your green investments into as many sectors as possible. • Avoid basing the selection of green companies and mutual funds based on last year’s performance. • Your overall portfolio should be well diversified e.g. across asset class, fund manager, fund manager style, geographically, industry and sector. The green element in your portfolio should be given a modest allocation, catering to your desire to be SRI aware, yet not ignoring economic fundaments or good financial planning practices • Select a green mutual fund or company wisely — it is important to research carefully, examine the fund holdings, philosophies and strategies. • Find a trusted financial adviser who is qualified, focuses on quality objective advice and is able to put green investing into its proper perspective as a financially viable portion of a well diversified portfolio. It’sNoDifferentforSRIs There are currently well in excess of 200 Mutual Funds which can be regarded as coming under the gambit of SRI. The average investor needs to be wary when assessing the suitability of these funds for inclusion in their portfolio. The four pillars that should be applied to each investment decision and this is no different for SRI’s — QVDT: Quality companies; Value for money; Diversification and appropriate Time horizon. Nevertheless, the investment green phenomenon is well and truly here. Investors are driven by altruistic as well as financial considerations in wishing to invest in to companies that help to slow mother earth’s degradation. Consequently there is even more pressure on companies to engage in green practices as they see the opportunity for investor capital. Indeed, governments around the world are offering companies useful financial incentives, channeling money into developing green technologies as well as enacting regulations which companies respond to as a result of new opportunities being created. Green investments can be rewarding from a moral, ethical and financial point of view. In deciding to go green, however, one should not forget about basic investment fundamentals. G+ Information This article was contributed by Brett Waller, Senior Vice President and a Licensed Financial Adviser Representative with ipac financial planning Singapore private limited, which is licensed with the MAS, Financial Adviser’s Licence No FA100003-3. For more information, please send Brett your comments or questions at brett.waller@ipac.com.sg In preparing this information, we did not take into account the investment objectives, financial situation or particular needs of any person. Before making an investment decision, you should speak to a financial adviser to consider whether this information is appropriate to your needs, objectives and circumstances. G+ BEYOND GREEN 29 MAY/ JUNE 2009
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