Environmental investing will become a major sector in the next decade and grow much faster than expe...
Environmental investing will become a major sector in the next decade and grow much faster than expected, according to Neptune fund manager Chris Taylor.
Speaking at the recent Investment Week SRI Focus event, Taylor predicted emerging industrial sectors that deal with environmental solutions will grow into key industries over the next decade.
"The sector will include new materials, recycling and materials recovery, waste management, power management, storage and distribution," he added.
He said Neptune's £4.9m Green Planet Growth fund identifies companies and technologies that help clean up the planet rather than using a Socially Responsible Investment (SRI) strategy.
"You need to invest early because a lot of growth will come quicker than people expect. You have got to get in at the start because that is where you make the money," he added.
The fund launched in December 2006 and aims to benefit financially from environmental trends, including climate change. It invests in 12 to 15 emerging industrial sectors with two to four stocks in each, and 40 to 50 holdings across a range of sectors, countries and companies. "We are trying to make sure we have a foothold in each relevant area," added Taylor. "These kinds of stocks can go up 30% in a day if things are going right for them."
In contrast, Henderson Global Investors uses a more traditional SRI philosophy as the cornerstone of its ethical range.
The Global Care and Industries of the Future funds focus on sustainability and corporate responsibility as two key areas, according to the group's SRI funds associate director, George Latham.
Hendersons has £1bn under SRI management, and invests in areas that profit from a shift towards sustainable development and companies with superior corporate responsibility.
Latham said there are 10 themes in the industries of the future, including cleaner energy, efficiency, water management and sustainable transport.
One stock he currently favours in the efficiency theme is insulation group SIG. "Insulation will be a key player in climate-change policy and with new building regulations," he said.
Meanwhile, Aberdeen is taking a unique approach towards SRI by choosing stocks that are not normally associated with the area.
Senior Investment Manager Jamie Cumming said Philips Electronics is one company not typical of SRI, but there are good reasons behind the position.
"Philips has been actively discussing eliminating incandescent lighting with European governments, which is inefficient and expensive," he added.
"Around 19% of global electricity is used for lighting, and Philips also has award-winning televisions that consume 28% less energy."
Cumming said increasing growth within the market is opening up more opportunities to investors, and it is important to offer choices for clients.
"It really comes down to personal choice and what issues people want screened out of portfolios, and it comes down to being able to have the flexibility to do that," he said.
Norwich Union is focusing on themes that include climate change and quality of life, and the company believes that ethical vehicles can outperform mainstream funds.
Peter Michaelis, head of SRI at the group, said sustainable development underlies the group's philosophy.
He added that key themes in the Sustainable Future and UK Ethical funds are climate change, quality of life, sustainable consumption, and governance and risk management.
Kingspan is an energy-efficiency stock within the climate-change theme that Michaelis favours.
He said that a building-products company has seen a 200% return over the past two years.
Michaelis added that another stock that had benefited the fund has been Goals, which falls into the quality of life theme by preventing obesity. It hires school football fields for adults to use as an outside gym. He said it has been a fantastic investment, returning 300% over the last 2.5 years.
Meanwhile, there are emerging opportunities in global power shortage and infrastructure, according to Co-operative Investments fund manager Mike Fox.
"We think power prices in the UK are a one-way ticket. They are going up and will continue to do so," he said.
The company is also reconsidering its approach to nuclear power. "We set up with an exclusionary policy towards nuclear power, but climate change has meant it is more credible," he added.
"Hydrogen and wind are not as certain as nuclear power, so we are becoming less anti-nuclear in our approach."
Fox's CIS Sustainable Leaders Trust has three core themes, including the environment, human welfare and sustainability.