Ethical investing can be good for your bank balance and your conscience.
It's 25 years since the first ethical fund was launched and in recent years ethical investing has certainly taken off. Now there is even a week long campaign, National Ethical Investment Week, devoted to championing it (8-14 November).
So is it possible to make money without harming the planet or breaking your own moral codes? Well, yes. If you don't want to fund the arms trade, or invest in activities such as smoking, drinking, pornography or gambling it certainly is.
The extent to which you screen out companies depends on your personal ethics and how far you want to take into account the social and environmental effects of the activities of the company you're investing in. If you don't want to harm any living creature, it probably becomes more difficult.
Besides I think being totally anti GM and nuclear power is illogical given the effect of climate change on the earth. If the worst predictions come true humanity could be fighting for its very survival this century. Moreover, there are plenty of 'ethical investments', run by rather unethical people that will easily leave you in poverty, making it easier to get into heaven but harder to live in the UK.
So, I'll take the middle course and point out three shares that hopefully won't raise the hackles of too many. You can donate a percentage of your profits to the charity of your choice to ward off any inadvertent bad karma caused by these investments.
Green energy
Green energy is one area where there are fortunes to be made. Since I first recommended Ceres Power (LSE: CWR) back in March, this AIM-listed developer of fuel cell technologies, has almost tripled in price from 85p to 230p. The rise has been fuelled by hopes that it will soon have a share of the UK domestic boiler market, helping households produce heat and power more efficiently.
This year has seen lots of progress for the company. In February it signed a deal with Calor Gas to develop an LPG-fired combined heat and power boiler for the domestic market. The deal will see £2.5 million paid to the Crawley-based fuel cell company in staged payments, including £1 million up-front, followed by an advance order of 20,000 units for the five-year period after 2012, should trials prove successful.
In May it confirmed that the 'Alpha phase' of a program using the same technology to develop and test a 1kW combined heat and power boiler for mains gas with British Gas had been a success. It has since received £2m from British Gas and further commercial field trials are continuing. Volume production is expected to commence in 2011.
Although it has still to make a profit, Ceres Power expects to end its latest financial year (to 30 June 2009) with net cash and short-term investments of at least £22 million.
Full-year preliminary results are due out in September and if you're not on board already, it might be worth doing so after these are out.
Environmental services
Veolia Environnement (Paris: VIE) is a French company that specialises in environmental services around the world. It recorded revenues of €36.2bn in 2008 with pre-tax profits of €994m, while its interims showed an operating cash flow of €2bn, a decline of 4.9% at constant exchange rates as compared with the first half of 2008.
It has hefty net debt of €16.8 billion but is taking measures to reduce this, including €1 billion of disposals this year and reduced investment.
It has exposure to a whole range of water treatment services, including waste water treatment and provides drinking water and wastewater services to 132 million people. Veolia has also recently been targeting the sea-water desalinisation market, setting up operations in North Africa and Arabian territories.
Veolia Environnement has also been listed on the UK's FTSE4Good index since 2004. This index comprises companies listed on FTSE Global Equity indexes that are considered to have the best sustainable development performance.
Electric cars
The purchase by Warren Buffet in September 2008 of $232 million worth of shares in BYD, equivalent to a 10% stake in the Chinese battery and vehicle manufacturer, sent its shares shooting up and they are still rising.
When I wrote about them a couple of months ago they were approximately $32 Hong Kong Dollars (approximately £2.50) having shot up 250% in the past year. They now stand at $45 Hong Kong Dollars. Still, given the potential this may prove to be as chip as chips a couple of years hence.
BYD is already very profitable and is set to become more so as it has also begun selling a plug-in electric car (called the F3DM) with a backup gasoline engine, a so-called 'hybrid' in China. It apparently goes 62 miles on a single charge and sells for $22,000 far less than its competitors are expected to cost when they reach the market in late 2010. It also plans to introduce all electric cars soon.
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