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Warming to green issues

There seems little doubt that the leading political theme today is the environment. Just look at the amount of press coverage that the Stern report received.

Now I have to admit that I remain somewhat of a sceptic on global warming or perhaps what is causing it. I also have to admit that I am no scientist and, therefore, I am left to believing what politicians tell me. This is somewhat unfortunate as I do not trust a single politician and my cynicism extends to the belief that all politicians want is to raise ever bigger sums of money for useless public projects.

Recently, Jupiter head of socially responsible investment Emma Howard Boyd and Charlie Thomas, lead manager of the Jupiter ecology fund, have given me a new perspective. What I believe or do not believe matters little. The fact is that there is a long-term trend that is gathering pace.

Big companies are looking for more environmentally-friendly projects and who can criticise them? Tesco alone is spending £100m on renewable energy and it is already looking to use dual-fuel systems in its 3,000 trucks via a company called Clean Air.

I think it is fair to say that many of us think of green funds as having somewhat mediocre performance. Of course, the reality is more complex. They limit the universe they can invest in and are therefore more volatile against the benchmark but increasing demand from companies, governments and individuals for environmental solutions is boosting the profits in some companies. Just look at the recent B&Q decision to sell wind turbines and solar panels.

The Jupiter ecology fund has six green investment themes. These are: clean energy, waste management, green transport, water management, sustainable living and environmental services. This means that the fund is more diverse than one might think.

Within the top 10 holdings of the ecology fund, the biggest is Cranswick which sells organic pork. There is certainly a market for its product. Having recently switched to my local butcher, although paying more, I am getting far better food.

Latchways is another interesting holding. The company deals with health and safety equipment and is growing strongly through products such as safety harnesses for personnel working on high buildings.

Nordex is one of the biggest wind turbine companies in Europe.

Even large-cap firms are in the top 10, with Aviva looking at climate change in terms of how it will affect building insurance. Thomas has been at Jupiter since 2000 and before that he was an environmental policy adviser to BP. Howard Boyd has been with Jupiter since 1994 and was recently invited to become a guest faculty member of the Prince of Wales’ business and environmental programme. This shows that the team are held in esteem outside the company.

There are a number of funds that cover one or two of the themes that Jupiter follows but few that cover all. The fund looks an ideal core holding, not only for those who wish to invest in an environmentally-friendly way but for those who can also see a long-term trend.

The ecology fund invests internationally, with 48 per cent in the UK, 20 per cent in North America, 19 per cent in Europe and 5 per cent in Japan. It is still dominated by midand small caps but this is inevitable as many of the companies involved in this area will be young and new.

If you are investing for 10 years or more, that should not stop you. In my view, the fund is undoubtedly a long-term buy.

Mark Dampier is head of research at Hargreaves Lansdown

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