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Many ethical funds invest in firms that are ‘part of climate problem’

Few funds which are marketed as ethical and socially responsible investments actually buy in to firms which directly tackle climate change, according to adviser Holden Partners.

A new report by the firm, A Guide to Climate Change Investment, shows that most SRI and ethical funds top 10 holdings include investments in mainstream companies such as Vodafone and Bank of Scotland.

Many have significant holdings in mining corporations or the likes of Shell, BP, Renault, Nestlé and Danone.

Partner Peter Holden says investors who hope to support the low-carbon economy may discover they are buying into multinationals “more associated with being part of the problem rather than part of the solution”.

The company’s guide rates Henderson’s Industries of the Future fund most highly, with 51.1 percent of its fund in environmental solutions providers.

However, in contrast, environmental stocks made up less than 1 per cent of L Ethical Funds portfolio.

Holden says: “This report shows that the SRI and ethical funds have not kept pace with the public’s appetite for environmental solutions. Many are investing in mainstream old-economy companies whose contribution to solving environmental problems is questionable.

The report says that a selection of “pure-play” environmental investment vehicles have 100 per cent exposure to environmental solutions providers.

These include listed funds investing in worldwide listed stocks, such as Impax Environmental Markets Trust and Merrill Lynch New Energy Technology.

Other shining examples include private fund Triodos Renewable Energy Funds and Aim-listed funds investing in private companies, such as Low Carbon Accelerator and Ludgate Environmental Fund.

Holden says: “There are good environmental funds available. The environmental economy is enjoying strong growth and is an investment opportunity.”

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