Invest in ethical funds if you think they will perform well – but don’t think you are saving the earth
Ethical funds are growing, particularly in the retail sector, and climate change is becoming more important in their criteria. A couple of weeks ago, Standard Life banned airlines from its SRI funds on the basis that they have high emissions.
Really, though, do airlines care? BATA, the UK airline trade association, voiced disappointment and called the fund managers hypocrites for their regular business flights. This is a PR debate – the airlines are not concerned about their access to capital. There are plenty of investors out there who have no ethical criteria and are more than happy to invest in airlines or anything else that looks like it will produce a good return.
Green portfolios could be a good investment if you think the market has underestimated the risk of future regulation or customers’ preference for green products. They are not an effective tool for increasing the cost of capital to polluting companies.