Five ethical plays for your 2012 ISA
Specialist IFA Barchester Green predicts the five biggest themes that will boost ethical portfolios this year.
By Joshua Ausden, News Editor, FE Trustnet
Tuesday March 27, 2012
"The increased cost of energy means that more companies are investing in energy conservation measures," argues John Ditchfield, director of Barchester Green. "According to Cheviot Asset Management, the energy efficiency industry is growing at 10 per cent per annum and the market is expected to reach $1 trillion by 2020."
He points to BorgWarner, a leading global supplier of highly engineered systems and components for automotive power train applications, as a good option for investors.
"Its technologies increase fuel economy and reduce emissions," he explained. "The company is increasing its exposure to China, now the largest automotive market with sales having surpassed the US in 2009. There are already more automotive assembly plants in China than any other country in the world."
The Standard Life Global Equity Unconstrained
portfolio is one of nine funds in the IMA unit trust and OEIC universe that holds BorgWarner in its top-10 stocks.
"According to the UN, the global population needs approximately 30 litres of clean water to meet its typical daily needs, yet according to the World Bank, 1.1 billion people do not have access to a reliable supply of clean water," says Ditchfield.
"An example of a company that will benefit from this trend is Geberit – a Swiss-listed manufacturer of pipes and water-efficient flushing systems for the residential and commercial sectors. This company is ideally placed to benefit from a cycle recovery in the housing/construction market and the increasing adoption of water conservation technologies in both residential and commercial buildings."
Geberit appears in the top-10 holdings of just one fund in the IMA unit trust and OEIC universe – Cavendish European
– which has a 2.6 per cent stake in the company, making it manager Caroline Vincent’s third-biggest holding.
"Investing in sustainable transport networks reduces carbon emissions and brings major health benefits by reducing levels of atmospheric pollution," Ditchfield continued. "In 2011 the state of California allocated $100m to clean transport initiatives such as charging infrastructure for electric vehicles, hydrogen refuelling stations for vehicles and also investment in biofuel development."
"We’d recommend Tianneng Power International – a leading provider of power packs for electric vehicles. It has a particularly strong product division in motor scooter and other light electric vehicles. It also builds solar and wind energy storage batteries."
With the number of people in the EU aged 85 and above likely to treble between 2005 and 2050, and consumer expenditure on healthcare in China forecast to grow from $75bn to $257bn by 2020, Ditchfield says sustainable healthcare is an asset class that investors can’t afford to ignore.
He points to Intuitive Surgical – a leader in operative surgical robotics – as a particularly attractive prospect.
"The company identifies difficult-to-perform surgical cases and offers surgeons tools to facilitate successful outcomes in a minimally invasive fashion. Such technologies aid reduced trauma, as well as reduced post-operative pain and surgical complications for patients."
Mark Urquhart’s £131m Baillie Gifford Long Term Global Growth and Brandon Geisler’s £138m Henderson US Opportunities
portfolios are among those that hold Intuitive Surgical in their top-10.
"As the world’s population continues to grow and consumption patterns change, the demand for raw materials will increase," Ditchfield says.
"One option to take advantage of this theme is Roper – an instrumentation and measurement company, which manufactures a range of sensors, valves, controls and meters. Its products help to minimise resource use in manufacturing processes – ensuring that manufacturing processes are as resource-efficient as possible."
, Henderson Industries of the Future
and Aviva Sustainable Future Global Growth
all have significant positions in Roper. According to FE data, it is the $2.2bn Pictet Water fund’s sixth biggest holding, accounting for 3.4 per cent of assets under management (AUM).