Sustainable Investing - the revolution begins

• Green Bonds

The first ever green bond, designed specifically to raise money for environmental projects was issued in 2007 by the E.U.'S European Investment Bank [ E.I.B.]. This market is now valued at nearly £1.1 trillion .

The main source of expertise in this market is Professor Sean Kidney co-founder and CEO of Climate Bonds Initiative, this is a non-profit organisation that aims to mobilise funds for green energy projects and works in 30 countries together with investment partners including Credit Suisse, Black Rock and Allianz Global Investors .

To date the amount raised by sovereign green bonds is £95 billion and 90% of this are due to issuances by European countries.

• WHAT DO GREEN BONDS FINANCE

ENERGY 36.0 %

BUILDINGS 26.5 %

TRANSPORT 23.0 %

WATER 6.5 %

LAND USE 5.0 %

WASTE 2.0 %

OTHER 1.0 %

• SHAREHOLDER ACTIVISM

At the time of writing 3,826 organisations have signed these U.N. backed principles for responsible investment together represent £89 trillion of assets under management.

Institutional shareholders investing in accordance with Environmental Social and Governance

[known as E.S.G.] principles have shown they can achieve some real successes this year. Examples

Of this activism achieving change are ;

1.Oil giants Chevron and ExxonMobil have both lost battles with shareholders concerning their climate strategies. In the case of ExxonMobil an activist hedge fund succeeded in getting rid of 2 board members.

2.Under pressure from a £140 billion shareholder coalition in May the major international

retailer promised to stock healthier food and drinks.

3.HSBC the bank agreed to phase out financing for coal-based industries after lobbying from a £1.74 trillion investor group.

However, while some investment managers are showing leadership in EFG managers

responsible for £26 trillion of investment funds are still doing nothing about the ecological harm caused by their investees.

James Alexander is CEO of the U.K. Sustainable Investment and Finance Association [U.K.S.I.F.] which represents fund management firms and other investment organisations has made a very intelligent statement , he says " you cannot divest your way to sustainability, that would simply mean that you have sold the shares to someone who cares less than you . So, engagement and activism is essential , funds should vote at AGM'S and work with companies to push towards sustainability. His view is that businesses should set E.S.G. performance targets and enable shareholders to vote on matters concerning climate change.

• Ethical Investing the chain reaction

1. The investor will insist to the fund manager that their money only goes into companies

which have a sustainable business model, so an oil or coal business will not qualify.

2.This then has a big effect on the investment strategy as managers adjust their portfolio to reflect the wishes of their clients.

3. This will then have a the effect on the stock exchange activity and the shares price.

4.The fossil fuel companies will have to change their behaviour and investment strategy

to prove their green credentials or their share price will suffer.

So, the climate change activists are asking investors to put environmental concerns

above all other considerations - return on investment ,profit etc.- and if the company

you want to invest in does not have acceptable environmental policies then you

should not invest. If they succeed and the funds desert those companies then the

stock exchange will go through a permanent seismic change .