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The 10 Green Industries for your Ethical Investment Portfolio
Ethical investing is concerned with industries that promote affirmative environmental programs, sustainable growth, and good corporate governance. Many people still think that investors in green industries may lose their money in the long run because it is difficult to maximise financial return when taking social ethics into perspective.
However, developments in the last 5 years would contradict this as there have been significant players entering "green industries" in recent years. These companies offer investors a diverse portfolio that provides potential for competitive returns. The industries these large players have entered vary substantially, however there are 10 key industries that you might want to look at to add to your portfolio of ethical investments:
1. Solar Energy
There is a growing solar energy industry that includes solar cell panel and component manufacturers and solar energy providers. Prominent solar power stations are scattered throughout New South Wales, Victoria and the Northern Territory.
2. Wind Power
The wind power sector not only specialises in the generation and sale of power, but also in the design and construction of wind turbines. This high-growth industry has spawned windmill farms across South Australia, Western Australia and Queensland.
3. Water Utility
There has been a growing need for alternative sources of water in Australia because many states are facing desertification and drought. Ethical investments have supported companies that operate water purification and desalination plants. The Environmental Group (EGL) provides clean water and clean air solutions.
4. Waste Reduction
Ethical investments in the waste reduction and recycling sectors have led to the establishment of various recycling centres throughout Australia. The number of recycling facilities that recycle plastic, metal, and organic waste has substantially increased after the establishment of a national voluntary recycling plan by the Australian and New Zealand Environment and Conservation Council.
5. Green materials
The use of green materials for everyday necessities is becoming more prevalent. Papyrus (PPY), for example is using waste banana trees to make paper and fire proof doors.
6. Alternative Medicines and Health
Investors that are interested in health and wellbeing are supporting companies which focus on preventative health measures like vitamins and diet. Blackmores (BKL) is an Australian company which provides products like vitamins, as well as information on diet, stress management and other health topics. Other cutting edge medical companies include Tissue Therapies (TIS) which has developed a way to enhance wound healing and tissue regeneration.
7. Carbon Offsetting
Many top Australian companies are also helping to reduce pollution by participating in the Carbon Disclosure Project. The project records those companies that wish to measure and disclose their greenhouse gas emissions and climate change strategies. As shareholders and the community are becoming more aware of carbon emissions, this sort of project helps to keep companies accountable. It also helps identify the lowest emitters or those that are actively reducing their carbon footprint.
Those businesses that want to offset their greenhouse gas emissions need to use companies that have large forestry plantations, like CO2 Group (COZ). Investors that are interested in the growing future of carbon offsetting and carbon emission reduction are investing in such companies.
8. Fuel Cell and Biofuel
Many investors are supporting ethical investments in the effort to find alternative fuel. Fuel cell technology firms and biofuel companies have become prime movers in the advancement of clean but reliable fuel, some of which are already available in some in electric vehicles and hybrid cars. Hythane is another alternative clean energy fuel which is currently used by Eden Energy (EDE).
9. Pollution Control
The pollution control industry is on the rise following the growth of companies that specialise in reducing greenhouse gas emissions. There are some pollution control companies like Hydromet (HMC), Dolomatrix (DMX) and Tox Free (TOX). Hydromet is recycling batteries and Dolomatrix recycles light bulbs and similar items.
10. Energy Efficiency
Few companies specialise in this field so you have to choose those who have had relative success in their line of business. Energy efficiency firms help individuals and businesses become energy efficient and comply with local energy regulations.
Summary
Ethical investing, for some investors, means investing in industries that promote affirmative environmental programs, sustainable growth, and good corporate governance. Many people still think that investors in green industries may lose their money in the long run because it is difficult to maximise financial return when taking social ethics into perspective. However, performance wise, it has been proven in Australia and New Zealand that investing responsibly performs on par with or better than the broader investment market.
The latest Benchmark Report prepared by the Responsible Investment Association Australasia (RIAA) details the performance of Responsible Investment (RI) in Australia. The following chart shows performance figures for the seven (7) year period ending December 2009*. The main points are summarised below:
- Australian RI share funds enjoyed a stronger return than the mainstream average.
- International RI share funds also outperformed the mainstream average.
- Balanced Growth RI fund performed slightly below the mainstream average.
FUND TYPE AUSTRALIAN SHARE FUNDS INTERNATIONAL SHARE FUNDS BALANCED GROWTH FUNDS
Average RI Fund 12.64% 8.06% 5.09%
Average Mainstream fund 11.52% 1.43% 5.16%
*Responsible Investment 2009 prepared by Corporate Monitor for the Responsible Investment Association Australasia. This report uses Morningstar, Fund Manager data and is available at www.responsibleinvestment.org
Karen McLeod is an Authorised Representative (No. 242000) of Ethical Investment Advisers (AFSL 276544). We provide investment advice for ethically-minded and socially-conscious investors that are seeking competitive returns. Ethical Investment Advisers (AFSL 276544) has been certified by RIAA according to the strict disclosure practices required under the Responsible Investment Certification Program. See www.responsibleinvestment.org for details.
The contents of this article are intended as general advice only. No specific person's circumstances, financial situation or objectives have been taken into consideration. You should not act on the information provided without seeking personal advice from an appropriately qualified financial planner. Information included from third parties has been reproduced with their permission. While the source has been verified as reliable, the actual content has not been checked for accuracy. Consequently Ethical Investment Advisers does not warrant the accuracy of the information nor accept liability for any errors in the data.
About the Author
Ethical Investment Advisers (Australian Financial Services Licence 276544) is an ethically minded and socially conscious financial services licencee that specialises in advising in ethical investments and self-managed superannuation funds. With over 36 years of combined experience in the Australian investment market, clients can access expert ethical investment solutions which cover strategic advice, and investment selection, as well as, ongoing management and investment portfolio management. Insurance consultation is also provided as part of our service offering.
