That’s a tax efficient investment product based on stocks and shares, sold here in the UK. I’m not sure how they work elsewhere.
My statement recently arrived, and the fund looking after my money is doing rather well. (continues below)
All you need to be a leader!
I was surprised. I hadn’t checked who the companies were when I began investing.
That was a mistake. Always important, after all, to know to whom your money is going.
So I’ve looked into it. And the findings are quite interesting.
I had expected the fund to be investing in clean tech firms. Exciting new technology companies set to capitalise on the next green revolution. It’s a risky investment, as the website told me.
But I thought I should put some of my money (such as it is!) where my mouth is. And perhaps make a profit too.
I assumed this would be a long term investment. Risky companies perhaps, but with growth potential.
Now I’ve looked into where the cash goes. You’ll be surprised.
More on that in a minute. The Virgin Money Climate Change ISA marketing copy, on the Virgin Money website here, proudly states that:
“The Virgin Climate Change ISA invests in specially selected businesses (predominantly in the UK and Europe) who aim to drive outstanding profit growth and have a lighter environmental footprint.”
“Fine”, I thought. “That sounds potentially good. Prefer the footprint part first, but like the ‘lighter’ idea”.
However, on re-reading it, a small alarm bell ought to have gone off. Where’s the mention of green or clean tech?
I read on.
Virgin goes on to say that: “Some ‘green’ funds fail to give decent returns because they exclude lucrative sectors like oil and gas.”
Oh oh, this is a bit worrying for a climate change fund, isn’t it? Then this:
“The Virgin Climate Change Fund is different. It recognises that environmentally aware companies in all industries are starting to gain a competitive advantage and are making a difference. So we first identify stocks from any industry we believe have the highest potential investment returns, then ‘cherry pick’ the best from an environmental point of view.”
Ok, so I’m mildly re-assured for a moment. “Making a difference”, sounds a bit clean tech, almost.
Then the marketing copy tells me:
“Most environmental funds exclude entire industry sectors – like oil, gas, electricity and transportation – on ethical grounds…this approach excludes some of the companies with the highest growth potential. This leaves the fund manager with a smaller pool of companies from which to select the best performers. The net result? A smaller portfolio, restricted investment opportunities, less diversity and increased volatility”
Hmm, I’m concerned again. Surely a climate change fund should be cherry picking carefully selected clean technology and green innovation companies from the long list of firms out there today?
High and low performers
An image apparently representing the whole stock market then appears. And the sales copy says:
“No industry exclusion filters means we include all industries – so you don’t miss out on lucrative sectors like oil, gas, electricity and transportation. Our approach gives the fund manager a larger pool of companies from which to cherry pick the high performers and exclude the low performers”
Virgin than says its green filter selects the companies “with good environmental credentials” for the final portfolio.
So what is Virgin’s green filter? It’s hidden away in the depths of the Virgin money website.
(Trust me, you really wouldn’t find it. I only found it because I asked where it was when I was on the phone and was guided to it, step by step, twice)
The green filter is a PDF found on the website equivalent of the back of the cupboard under the stairs, the one you forgot was there until you needed some shoe polish.
Real corporate responsibility, described…
Here’s the statement that describes what it is, from the PDF on Virgin Money’s website:
“The Fund invests primarily in liquid listed European equities of issuers in all sectors to develop a portfolio of securities of companies which benefit either directly, or via sustained competitive advantage from pursuing environmentally aware capitalism. For example, companies taking positive action on the corporate responsibility front by promoting environmentally aware behaviour internally, such as encouraging recycling in their workplaces, adopting a carbon emission offsetting programme or recycling side products such as the re-injection of CO2 in oil exploration.”
Hang on a minute. “Encouraging recycling in their workplaces” ?
So an oil company could get into the Virgin Money Climate Change ISA fund by encouraging employees (not ordering them), to have a recycling bin in their office.
Is that really green? No, not at all. And it doesn’t do a lot for the climate either, really.
Among the holdings by the fund, revealed in the hidden PDF, are:
Tullow Oil, BAE Systems, BHP Billiton, HSBC, Royal Bank of Scotland, Total, Arcelor Mittal, Novo Nordisk and Rio Tinto.
Now, I’m not saying that BHP Billiton and the other companies above are not doing their best to cut carbon emissions. They are. Novo Nordisk has made great efforts. Imperial Tobacco has also made good progress.
But are these the kind of companies you expect to find in this portfolio? I was surprised.
Investing in stopping climate change? No
No wonder the fund is doing quite well given the recent uptick in stock prices since March this year.
But surely it shouldn’t be called a “Climate Change” investment product.
That’s greenwash really. Accidental or deliberate. And I’d wager it’s not accidental.
This makes me wonder: If Virgin is doing this, and getting away with it, who else is doing this?
And how many companies of the future, real climate change leaders, are not getting the money they need because it’s going to big firms who can manage quite well without this cash?
It’s not the fault of the companies I’ve mentioned. They are all doing their best. It’s the investment managers at places like Virgin Money who ought to be ashamed of themselves.
Without really realising it, they are setting back progress in tackling climate change through new technologies, and mis-selling products at the same time.
Do we want to do business with companies who do this? I don’t think I do.