Money news, advice and predictions for savers and spenders.
By Jeremy Gates
Although Prime Minister Gordon Brown thinks next month's Copenhagen Climate Change Summit could save the planet, others are thinking more about the potential benefits from investing in the growing 'Green' agenda.
With National Ethical Investment Week ending on November 14, that concept has been to the fore.
New figures show that the amount held in ethical funds - which invest only in companies deemed to help and protect the environment - has soared from £1.5 billion a decade ago to around £7b today.
The first ethical managed fund, F&C Asset Management's Stewardship Growth, celebrated its 25th anniversary this summer. It manages £2.4b of ethical investment in four funds.
Many people probably have part of their pension pots in leading ethical funds including Jupiter Ecology (market cap £307 million), BlackRock New Energy (£106m) and Schroders Global Climate Change Fund (£20m), which launched in 2007.
A special poll by YouGov, carried out for this week's campaign, reveals that 49% of savers want to 'make a difference'- and make money - from ethical investments. The survey also found the 55-plus age group is keenest to back the green agenda, both when they they save and when they spend.
But even with nearly 100 green and ethical funds to choose from, only 8% of investors hold a green financial product.
"Investors are starting to see how they can profit from the shift to a more sustainable world, as events like Copenhagen lift sustainability issues up the political and media agendas," says George Latham, head of socially responsible investment at fund manager Henderson New Star.
"There is growing interest from investors in themes that provide solutions to sustainability changes, including water management and education, alongside more traditional green investment themes such as cleaner energy and sustainable transport."
In theory, as green regulations force consumers to spend more on measures to cut energy bills, the case for long-term green investment - either in managed funds, or shares like waste specialists Biffa (now taken private) and Shanks - looks a no-brainer.
"Large numbers of people are putting their money where their mouth is and doing their bit to create a sustainable future," says Penny Shepherd, chief executive of UKSIF, the sustainable investment and finance association promoting NEIW.
"There are simple steps you can take to apply these principles to your pension, ISA and other investments."
That's the theory. But finding successful ethical investments isn't always easy.
When M&S launched an Ethical Fund in 2007, I fixed a £75 monthly direct debit. Thirty months on, my holding is worth £200 less than the total paid in, so my cash would have done better in a building society.
Green shares are even harder to fathom: Newcastle-based Eaga is an obvious beneficiary in the fight against climate change, because it turns over £750m a year making homes more energy efficient to meet the Government target of cutting carbon emissions by 25% by 2020.
As many bills for this work are paid by public-sector grants, Eaga looks pretty recession-proof. Yet its shares - which cost 181p each in June 2007, when the company floated - changed hands this week at 143p. All 5,000 Eaga employees are shareholders, with other shares held mainly by big institutions.
Andy Parsons at The Share Centre isn't surprised by this.
"All sorts of green ideas and environmental initiatives are discussed at top level," he says, "But you must remember that their impact on everyday life is still fairly limited.
"People are slowly changing their habits and their consumption patterns, but it is only when these changes become dramatic that you will see really significant growth in earning patterns flowing through to companies, and to the funds which invest in them."
Another recent problem for ethical funds is that they won't hold shares in oil, mining and tobacco companies - which have driven this year's rally on the London market.
Because investing in the green revolution is so complex, most people ask a specialist financial advisor to suggest a suitable fund.
Recommendations by The Share Centre include: Allianz Global Eco trends, a £19m fund run by Bozena Jankowska focusing on alternative energy sources, energy efficiency and environmental quality; Jupiter Ecology; and Schroder Global Change.
At the F&C Stewardship International Fund, which delivered a 21% return in the past year, fund manager Terry Coles attributes his recent success to the decision to expand ethical investing techniques beyond the "traditional stomping ground" of the US and Britain to fast-growing emerging markets, notably Asia and Latin America.
Impax is a much smaller fund manager, holding £1.4b of investors' money, but its expertise in the ethical sector is widely accepted.
"The environmental sector offers better growth and returns than the mainstream economy and is therefore a smart place to allocate funds, whether you are ethically motivated or not," says Ian Simm, manager of the Impax Environmental Markets fund.
Impax has successfully identified fast-growing companies in renewable energy, water treatment, energy efficiency and environmental consultancy. One of its major investments is Vestas, a Danish maker of wind turbines.
In five years, Impax Environmental Markets Fund has turned £100 into £161. Last month, Impax raised £104.5m to launch a new Asian Environment Markets investment trust to tap the potential of the Asia-Pacific.
"The big difference is that in the last big recession in the early 1990s, companies focused on environmental operations were seen as a luxury which a struggling economy couldn't really afford," says Simm.
"Now environmental issues are at the centre of fiscal stimulation policy, and how to get the economy kickstarted again in the next couple of years.
"If Copenhagen achieved no agreement at all, it would be a negative signal to the energy efficiency business. I have little doubt some useful agreement will emerge in due course, if not within the first two days."
On past form, however, nobody invests in ethical funds for a quick profit, or high annual income.
Mostly they pay minimal dividends, so investors must be convinced they will see a decent capital gain over the medium to long-term as new technology moves into the mainstream.
:: Information: Financial advisors specialising in ethical investing are listed on yourethicalmoney.org. See also neiw.org, marking this week's campaign.
F&C Asset Management (0800 136 420 and www.fandc.com); The Share Centre, with several ethical funds on its Platinum 120 range to keep initial and ongoing management costs down, is on 01296 414 141 and www.sharecentre.com.
Poundnotes
:: The determination of UK households to save money has risen to its highest level since December 2008, says the Nationwide BS Savings Index, but this might reflect the determination of over-50s to take advantage of new ISA limits which took effect for them in early October.
"Eligible savers have reacted positively to the increased annual ISA limit as our exclusive 50-plus three-year fixed-rate ISA bond has attracted more savings than expected," says Nationwide head of savings Andy Hutchison.
However, Andrew Hagger at Moneynet.co.uk urges young families to step up saving too, so that when they suddenly need £1,000, they don't use cards where interest rates top 20%.
Hagger says regular saver accounts, usually requiring a standing order of £20-250 per month, pay a generous rate of 4-5% if a year of regular saving is completed. You can find accounts like this with Abbey, Norwich & Peterborough BS and Principality BS.
:: Credit card users in their twenties are the least inclined to pay off debts in a hurry, says research from moneysupermarket.com.
It revealed that almost a third of all card users have no intention of paying off the balance within the next six months.
The website's credit-card expert Peter Harrison says heavy spending on gifts could cause serious difficulties in 2010, not least because high street banks want to bump up interest rates on outstanding balances.
Already, a Nintendo Wii and Wii Fit retailing at £219.99 would cost £240.56 if financed over a year. That could soar if the banks get their way.
"One way for borrowers to reduce interest payments is to take out a card with a 0% introductory offer on balance transfers, affording them a better opportunity to clear debt," says Harrison.
However, cards should be used on purchases over £100, to get protection under Section 75 of the Consumer Credit Act if anything goes wrong.
:: With-profit bonds, invested in property, shares and fixed interest, were designed to 'smooth' investment returns for savers in difficult times, but their recent performance has been so bad that many financial advisors avoid them.
Now insurance giant Aviva offers a guarantee available from November 30 on new investments in its With-Profit Guaranteed Fund. Investors who stay in for a minimum five years will get back at least the amount originally put in.
:: Although smart meters to help British households cut their energy needs should be installed in every home by 2020 at a cost of more than £13 billion, price comparison service uSwitch.com says their early impact could be limited because 57% of consumers don't know what they are.
It says the total bill of energy-saving measures proposed for homes could hit £233.5b, which could add £548 to household energy bills for 15 years. However, 36% of consumers are only prepared to pay an extra £100 per year to fund this massive investment.
"The switch to smart meters could be a disaster unless people fully understand the reasoning behind the move and how it will benefit them in the long run," says uSwitch's Will Marples.
"Householders need reassurance the roll-out will be efficient, speedy and as cost-effective as possible."
:: High-five savers:
Phone No Rate Account Period Deposit Interest paid
Skipton BS 0845 717 1777 5.35% (F) Fixed Rate Bond 30/11/14 £500 Yly
Yorkshire BS 0845 1200 840 5.30% (F) Fixed Rate Bond 28/02/15 £100 Yly
Investec Bank 0845 366 6333 3.36% High 5 Three Month (P) £25,000 Yly
West Bromwich BS via branch 3.33% Branch Bonus 2 Instant £100 Yly
Citibank www.citibank.co.uk 3.30% Flexible Saver 6 Instant £1 Mly
:: Top-five borrowers:
Phone No Rate Period Max% Adv Fee Incentive
HSBC (Rem) 0800 494999 2.99% discounted for two years 75% nil Yes
First Direct (Rem) 0845 610 0100 2.99% variable for term 60% none Yes
ING Direct (UK) 0845 603 8888 3.09% for term 75% £695 Yes
Co-operative Bank 0800 633 5286 3.24% to 31/01/13 75% £995 Yes
The One Account 0845 610 1060 3.75% for term 75% none Yes
Code:
*F - Fixed
*P - Operated by Post
*B - Operated by Post/Telephone
*T - Operated by Telephone
*W - Operated by Internet
*H - Operated by Internet/Telephone
*S - Available only to those aged 50 or over
*R - Available to those aged 60 and over.
:: Source: Money£acts - Tel: 01603 476 476 (All rates subject to change without notice).
