The Observer: Wheels within wheels on the big green bus;
ETHICAL BUSINESS
March 8, 1998
SECTION: The Observer Business Page; Pg. 8
POLLY GHAZI
AT FIRST glance, it might appear that ethical fund managers looking to invest in the transport sector have got it easy. Public transport companies, with their contribution towards minimising damage to the environment, would get the thumbs up, you might think. And by the same token, private transport and oil companies would get the thumbs down.
The reality, however, is not quite so simple.
Old-fashioned bus fleets, for example, belch out highly noxious fumes while some car manufacturers are pouring money into developing emission-free vehicles.
And what about tricky companies such as Railtrack, which get plus marks for the environment but minus marks over health and safety fears? Do you invest in them or stay clear?
'Like any environmentally and socially responsible investment, it's all about balance,' says Toby Belsom, a research analyst on the NPI Global Care funds. 'Railtrack is a good example. When it was floated there was controversy about the Government selling off the country's silver and how the rail sector was in danger of falling to pieces, as well as other health and safety concerns.
'So we sent a questionnaire to our Global Care Unit trustholders asking them whether they would approve or disapprove of us investing in Railtrack. Seventy per cent said yes, and 30 per cent said no. We went ahead and Railtrack has proved a good investment, but we have kept up a dialogue with the company about the social problems our shareholders raised.'
Transport companies account for 11.5 per cent of NPI Global Care's pounds 120 million annual investment portfolio - a typical percentage for most of Britain's 35 ethical funds. The decisions taken involve careful reading of emerging markets, with 'green' fund managers using their specialist knowledge to spot innovating companies ahead of the mainstream pack.
So how do they go about it?
NPI and Jupiter Asset Management, the two companies with in-house ethical fund research teams, take broadly the same approach. The companies that make it through their rigorous screens either provide a positive environmental service like most public transport operators, or are the 'best in their class' in terms of minimising their impact. They must also, of course, be large and prosperous enough to be a good financial bet.
The negative screen produces some obvious victims. Neither NPI nor Jupiter will invest in car manufacturers or in airlines, which are responsible for 5 to 10 per cent of all greenhouse gas emissions. Oil companies, which are major contributors to man-made global warming and often have dubious human rights records, are out of bounds.
BUT there are also less obvious choices to be made. Jupiter's green funds, for example, invest in FirstGroup (formerly FirstBus) and the little-known Go -Ahead Group but not in Stagecoach, the largest quoted bus and train operator.
'Stagecoach is not on our approved list because it has not made as much progress on alternative fuels as FirstGroup,' explains Emma Howard Boyd, of the Jupiter environmental research unit. 'FirstGroup is at the forefront of bus development, testing low-floored buses in Bristol run on compressed natural gas, which help disabled people and are greener than diesel-run buses.'
FirstGroup's expansion into trains - it now operates the Great Eastern Railway - adds to its credentials, she says.
Similarly, the Newcastle-based Go-Ahead Group is testing buses run by electric batteries in Oxford, notorious for its congested city centre. It has also developed a catalyst that minimises exhaust emissions from its traditional diesel buses.
Both Jupiter and NPI, though they don't invest in car manufacturers, are prepared to invest in companies developing cleaner vehicle engines. Both invest in Ballard Power Systems, a Canadian company developing an emission -free engine powered by nitrogen and oxygen. Daimler-Benz bought a stake in Ballard last year and Ford has also signed a partnership agreement on developing the technology.
In similar vein, NPI Global Care invests in BOC, the British industrial gases manufacturer, under its 'best in class' category. BOC is working with Marks and Spencer to develop a gas engine for the supermarket chain's car fleet. 'BOC was quite a difficult one,' admits Belsom. 'But there are no all-white companies. The bottom line is that everyone we invest in is involved in environmental improvements.'
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