1. Climate Change & Money An ethical investment perspective
Presented by
Julian Parrott – Ethical Futures llp

2. Julian Parrott
Retail financial planner – private clients, trusts & charities
Extensive sector experience & participation
Introduce your experience

3. Session Outline Ethical Investment Markets & Process
What is it and why does it matter?
Markets & Process
Relevant finance sectors, investment process
Trends & Market Development
Evolution and developing themes & links to climate change
Topics and agenda we will follow – Q’s welcome as we go through

4. What’s in a name? Ethical Investment is an umbrella term.
Causes some people some ‘marketing’ communications concerns.
Other terms coined as more thematic perhaps less judgemental approaches developed.

5. Ethical Investment – a definition
“A system of financial management or investment that seeks qualitative outcomes other than purely the management of returns. Outcomes sought may reflect ideas from faith, social, environmental and governance theories.”
Source: Ethical Finance Hub
EFH definition – intepretation depends on starting point.

6. Do you know what its doing?
It’s your money
Do you know what its doing?

7. Development of the ethical investment market
18th C
early Quakerism
19th C
Benevolent capitalism
1960 & 1970’s
social activism
1980’s
UK ethical market starts
2000- today – market rapidly evolves
Quakerism – slavery, John Wesley/Methodism “use of Money” sermon
19th C benevolent capitalism Cadbury, Rowntree's etc.
60’s & 70’s – challenge to authority, Vietnam – Pax , Apartheid – banks
1983, EIRiS launched 1984, Friends Provident Stewardship
2000 an on significant evolutions in markets and assets available – solutions have become more investable

8. Where can you manage your money ethically?
Banks, investments pensions

9. Approaches to ethical investment
Core approach is Investment Screening
Negative Screening – avoidance
Positive Screening – positive bias/selection (e.g. climate change)
Engagement – active ownership

10. Screening & selection process
Criteria
Filter
Select

11. Screening is a filtering process
Negative -
Arms
Alcohol
Tobacco
Environmental damage
Human rights abuses
Gambling
Animal testing
Nuclear
Pornography
investable stocks
Social
Sin
Eco
Positive +
Environmental tech
Positive goods & services
Community involvement
Responsible business practice
Core screens – not universally applied
Vast number of different issues that can be considered

12. What makes an investment ethical?
No common standard (in UK) – but norms apply
Principles based approaches & innovation of ideas,
guided by expert opinion & thought leadership
Resistance to kite marks & standards limits innovation
But, alos leads to cncerns over ‘greenwash’…

13. Who does the research?
In-house researchers, investment managers and outsourcing
In- house teams, stock analysis, controversy screening & company meetings

14. Market development & themes
Negative screening has not met everyone's expectations – so market has evolved:-
Impact
Sustainable
Thematic
SRI
Ethical
Dark green – light green – direction of travel ;
impact developing and not issues remain around measurement & outcomes

15. Investment trends connected to climate change

16. Response to the challenges
Avoid
Carbon & fossil fuels
Unsustainable practices:
Intensive Farming,
Extraction
manufacturing
Supply chains
‘externalising costs’
Irresponsible management (ESG)
Focus on:
Renewable energy & energy efficiency
Green & smart technology
Telephony & digitisation
Building efficiency, supplies & better communities
Circular economy
Better transport & infrastructure
Waste management
Water supply & management
Gender equality & opportunity

17. A search for solutions & metrics
To meet demands of the market –new approaches have evolved.
A positive philosophy replaces negative screening
The emphasis is placed on outcomes
Engagement & ESG
Climate change & sustainability
Impact
Impact reporting
adoption of UN Sustainable Development Goals
Impact reporting; issues around consistency, quality & availability of data, disclosure & interpretation.
SDG’ – useful communication tool – but similar issues exist – wide range of interpreations. Not a system or process of investment. Philosophical approach still required.

18. Performance trade off? Academic research suggests not
Long term correlation to mainstream returns
Short term variance due to stock/sector exclusions
Limited range & size of ethical deposit takers can affect deposit rates
But – the ethical and environmental ‘dividend’ is equally important to clients
Triple Bottom Line
The Triple Bottom Line Defined. The TBL is an accounting framework that incorporates three dimensions of performance: social, environmental and financial. ... The TBL dimensions are also commonly called the three Ps: people, planet and profits

19. Next steps Ask an adviser!
Find out what your money is doing and if you are unhappy with it….
make a positive change
And if you are still unsure …………
Ask an adviser!

20. Thank You & Questions