Rise of ethical consumer to support growth in green investing

The upward trend of ethical consumerism will continue to be a key long term driver of growth, according to Charlie Thomas, manager of the Jupiter Ecology Fund.

The Jupiter Ecology Fund, which is celebrating its 20th anniversary in 2008, has benefited from the increased focus on green issues by governments, corporates and - more recently - consumers. The Fund, which was the first 'green' unit trust available to retail investors, has returned 413.35% since launch, compared to a return of 343.77% from the IMA Global Growth sector.

Thomas says that while markets are likely to remain volatile in the short term, "Attractive valuations and a huge uplift in activity and interest over the past couple of years means that we are at the most interesting juncture in 20 years in terms of green investing."

The Jupiter Ecology Fund aims to achieve long term growth together with a growing income through investing in companies that have positive growth supported by trends in environmental and social policies and regulations. It invests predominantly in six themes namely: clean energy; water management; green transport; waste management; sustainable living; and environmental services.*

Charlie Thomas, Fund Manager, Jupiter Ecology Fund, comments: "The major underpinning of our investment strategy for the Fund over the past few years has been based on three long term growth drivers. The first of these is the consumer. We have seen a dramatic uplift in activity over the past two years and while we would expect this to continue, it has not yet been tested in an economic slowdown so it will be interesting to see how the ethical consumer behaves in the coming months.

"Secondly, there has been a huge shift in governmental and corporate policies. Legislation has diverted capital flow and this is likely to continue, potentially at an even greater rate in Asia and the US, for example.

"Finally, capital expenditure commitments by corporates have had a dramatic impact on this area. Factors such as high energy prices mean there is a direct economic imperative for moving forward on environmental issues and companies have not failed to recognise this.

"While the general principles of the Ecology Fund have remained consistent over this period the universe of stocks in which we can invest has expanded dramatically from around 250 stocks then to over 1000 now and this is growing every day. The small and mid cap area of this market, which we generally favour, is incredibly dynamic. To illustrate this, we would point out that 5% of our portfolio has been bid for, or is in a bid situation, since the start of 2008. This is despite the current volatility in markets. The green sector is also an increasingly complex market and this is where we can use our specialist understanding to pick the stocks that are going to make money for our investors over time."

The Fund is a screened SRI fund with a rigorous approach to company selection, combined with a range of ethical exclusions. The fund manager's style is to invest for the long term and this is reflected in the typically long holding period of companies within the fund. There is a strong focus on stock picking as the fund manager uses in-house specialist research to select what we believe are the leading companies across our green investment themes, regardless of the location of the company or its size.

Charlie Thomas, Fund Manager, continues: "I believe the green investment case remains very positive as the long term growth drivers for the sector have strengthened considerably over time. Currently, we are particularly interested in the clean energy theme, with emphasis on energy efficiency. Companies such as Itron and Johnson Controls in the US, as well in the UK insulation plays such as SIG, offer good prospects.

"It is important that potential investors recognise that this is a potentially volatile market. However, it is an area that is becoming increasingly difficult to ignore and, I believe, the specialist knowledge we have here at Jupiter is crucial for picking the winners of the future.

"Against the background of stockmarket volatility, we will continue to stay close to our original strategy. We remain defensive in light of the turmoil caused by the current credit market conditions and hold cash on deposit. This cash position allows us to take advantage where we believe there are opportunities."

Emma Howard Boyd, Head of SRI at Jupiter, comments: "We believe that green investing has moved on. While green investing is still a specialist area of the market, it is now starting to be seriously considered by investors as part of a balanced portfolio. It is no longer just about principles but also profit and the long-term drivers of growth in this market are clear and appear unstoppable."