Is being green worth its weight in gold? Or will moral credit leave you bankrupt?

Sara Benwell 11.03am

Ethical investment is seriously hot right now. Last week was National Ethical Investment Week, the week where everyone is encouraged to put their money in funds that will save the world, or will at least not outright harm it.

There’s a broad range of ethical investments: from those focusing on being environmental, sustainable or just generally socially responsible, to those simply avoiding funds that might be considered ethically dodgy, such as weapons, alcohol, pornography or gambling.

The Government has been pushing social investing over the last two years, supporting 'impact investing', and launching Big Society Capital, an initiative designed to take an estimated £400 million from dormant bank accounts to help develop the social investment market. It is also launching the world’s first Green Investment Bank to provide financing for low carbon investment projects (see Alex’s previous coverage of it here).

It’s not just the Government. There is strong evidence of increasing consumer demand for greener investments. In fact Triodos, a bank specialising in ethical investments, has seen a 78 per cent increase in people wanting to open savings accounts. It has also doubled the money coming into its accounts each year. Furthermore, according to Eurosif, the Brussels-based European Sustainable Investment Forum, the amount of money in the UK invested in a “sustainable and responsible” manner has reached an estimated £275 billion.

The obvious reasons behind these funds are morality-based, but an investment needs to make money too or it’s just a waste of time. Yet can ethical investments offer real returns?

They are somewhat subjective, insofar as they depend on what any particular individual considers to be morally important, and the process is far from straightforward, but that doesn’t mean there’s not money to be made. Ethical investments, bank accounts, pensions and mortgages are now available to most consumers.

However, renewable energy has been a disaster for ethical investors recently, with wind and solar power systems companies being among the worst-performing stocks in the last few years.

For instance, the Guardian reported that Vestas, the Danish wind turbine maker, had cost investors almost 95 per cent of their money. The article also reported that the BlackRock New Energy Investment Trust has fallen 49.9 per cent since 2007. Furthermore, negative screening of so-called ‘sin funds’ mean that investment products are less diversified and there is less recourse to defensive funds, which can lead to volatility. These are just some amongst a multitude of examples, illustrating why many people are wary when it comes to ‘being ethical’ with money.

Nonetheless, there is some evidence that it’s possible to be ethical and still taking care of your money.

One theory is that companies on the right side of the ethics debate are less likely to fall out with regulators, end up in expensive court battles or face strikes or boycotts of their products from consumers. All of these can impact reputation and even share price, so ethical companies should look like good long term prospects.

This is illustrated in the pensions industry, where an increasing number of funds are declaring support for the UN-backed Principles for Responsible Investment (PRI), an institutional investor initiative for ethical investment. The number signed up has jumped by over a quarter in the last two years.

Furthermore, there are those out there who believe a carbon-based economy is unsustainable, for obvious reasons. This too suggests that forward looking ethical investments are likely to do well in the long term.

Another thing to consider is as public opinion shifts, and we care more and more about everything from whether our eggs are free range to whether we invest ethically, it seems likely that the value of companies who can prove to stakeholders that they have sustainable values will rise.

It is important that the Government continues to support ethical investments, and it is encouraging that the public is beginning to demand how their money is made and at whose expense.

However, there must be further support and ambition from both the Government and the financial services industry if ethical investment can be sustainable. Meanwhile the Coalition should be wary about throwing money behind schemes that may leave people worse off, especially in a financial crisis. It’s all well and good being “ethical” but it will backfire if it costs people their pensions.

There are ethical funds that perform well, so perhaps the government should think about putting its money towards education, so that people are equipped with the knowledge to do the right thing – whilst also putting the pennies away for the future.

Follow Sara on Twitter @sarabenwell

Marcuse: Prophet or Madman - he deserves to be discussed

Henry Hopwood-Phillips 2.30pm

Many people confused by the muddied political waters of contemporary Britain could do a lot worse than look to an obscure Marxist thinker called Herbert Marcuse for enlightenment.

The first thing he begs us to do is to stop looking at the totalitarianism that followed our first bout of Liberalism as an aberration. The bourgeoisie do not continue to have one set of uniform desires forever.

Instead, liberal bourgeois political and social thought is a characteristic of early capitalism. As capitalism develops, totalitarianism better reflects late bourgeois Man’s political and social demands.

A big statement.

The big question that looms is: why the great change?

Marcuse reckoned that as the unhealthy strains and pressures of a capitalist economy played out on society the bourgeoisie would flock to the state to protect its interests. The state would be more than happy to oblige in a Faustian pact which involved legitimising more and more intervention to preserve the stability of the market and bourgeois aspirations and more and more taxes to fund such intervention.

These unhealthy strains and pressures are mapped out neatly by Marcuse. The gist of his argument is that the freedom which favoured shaping material means for spiritual ends that was characteristic of early capitalism suffers a slow, grinding reverse. Instead the spirit is forced, in a procrustean manner, to further the needs of established material ends. The logic of this change is that “the culture of the bourgeois past [must be attacked] in order to preserve the economic order of the bourgeois present”.

Most people like to reduce totalitarianism to its most potent symbols such as political dictatorship. However, Marcuse reminds us that the crux of real totalitarianism is the elimination of a culture which embodies ideals subversive of and alternative to the status quo. Britain, for all its diversity, has paradoxically begotten a strong political orthodoxy. It is, as all orthodoxies are, a defence-mechanism which fulfils its purpose, however, such political proto-totalitarianism comes at great cost.

When work and political conformism are encouraged for their own sake then people begin to feel that the social order is exploitative. Division occurs along lines that were never there before as the need to “repress and channel the desire for pleasure into limited individual ends” results in “frustration and destruction”. Frustration and destruction, two words which characterise much of our flattened cultural production. 

A double-think is established. In bourgeois poetry, lovers love in opposition to the whims of the soul, the fear of a loss of freedom and ultimately death. But in every-day life, love is made into exactly what the bourgeois economy needs it to be - a thing of duty and habit. Flaubert and Kafka are some of the first authors who start making literature reflect bourgeois economies: very unfulfilling, disappointing realities.

This erosion of spiritual endeavour has an impact even on our sex lives. Historically the erotic impulse has been characterized by conflict, with Eros sitting at the throne of our being, as Plato and later Freud taught, and with Thanatos (the death principle) being set up in opposition.

But perhaps, as love’s true opposite is not really hate but indifference, Eros’ true nemesis has been de-sublimation symbolised by the marriage of Soter (safety) and Peitharchia (obedience).

If sublimation is the act of creating to express a repressed libido, de-sublimation - the act of repressing the ego, not by expression, but by co-opting, by relief in established routes such as porn, advertising etc., represents the denial of Eros.

Whereas Thanatos cripples the soul as a concept to suffer at the end of life, de-sublimation cripples Eros during day-to-day reality. Eventually sex is pacified, its impulses mitigated, it becomes unsexual. The other passions which flow from it are starved of their source. Man becomes a passive instrument.

How much of this criticism is true and how much false is up to the reader to decide. But it is a scandal that his ideas are not aired by left or right in a society that, at its most creative core, thirsts for such an honest appraisal. 

Follow Henry on Twitter @TheHolySmoke

Avoiding our Road to Serfdom

Henry Hopwood-Phillips 10.00am

There will be, in the next generation or so, a …method of making people love their servitude, and producing dictatorship without tears, so to speak, producing a kind of painless concentration camp for entire societies, so that people will in fact have their liberties taken away from them, but will rather enjoy it, because they will be distracted from any desire to rebel by propaganda or brainwashing… this seems to be the final revolution.

Aldous Huxley

Much energy has been spent by the Press in trying to diagnose our present economic malaise.

Not much time has been spent in diagnosing the long-term political, sociological and philosophical trends that are reforming and reshaping the spiritual and physical topography of twenty-first century Man.

Critiques have come and gone but none seem to have been heeded in earnest. Kafka and Orwell warned of the dire repercussions that a Rousseau-esque Enlightenment might bring. Spengler, Arnold, Renan and Evola alerted us to the paradoxical particularity of the universalist and bourgeois nature of the Enlightenment project. Strauss and Bloom argued against the post-modern mutation - its abandonment of the metaphysical project in favour of Nietzschean-inspired particularity. Eliot, Hayek and Scruton attacked the new Establishment from a more grounded Burkean perspective.

But few of their ideas have been properly articulated outside of cloistered seminars. So perhaps it is worth reiterating some of the themes that still seem strikingly relevant today.

We must become more aware of the over-weening power of bureaucracies that smother hapless citizens in the absurdities of over-centralisation. Bureaucracies that crush the human spirit until, as Kafka wrote, “we expect errors, not justice”. Bureaucracies that create a world in which the innocent are seen as collateral damage and liberty is stifled by what is “known” to be best by non-accountable experts, the bastard offspring of specialisation. Experts who, as Ghandi explained, “know more and more about less and less”. Television shows like Yes Minister and The Thick of It have strong comedic currency because they play on and make light of the darker side of bureaucracy and politicking.

We must become more conscious of the fact that political and financial elites may collude. Since Bretton Woods, a hybrid, crony, managerialist/cartel capitalism has emerged and become so entangled in political bureaucracies that their respective interests are now barely distinguishable. 

We must become more mindful that political elites use taxpayers’ money - present and future - to prop up financial interests for short-term political ends because they lack the courage or the epistemological framework to build or participate in any grander scheme. Meanwhile, financial behemoths sit secure in the knowledge that the state increasing its mandate usually ensures smaller and smaller competitors drown in an ocean of tape and procrustean regulations.

Free market capitalism  - as Adam Smith explained - is chewed up and spat out by vested interests. The financial system becomes cartelized when it needn’t fear too much about accountability for procedures that would be penalised by true capitalism, e.g. over-leveraging, embezzlement, misrepresentation of risk etc, because it is in cahoots with the government.

Voters are to be mollified, nullified, manipulated, patronised, agreed with, but never genuinely consulted. Political science’s wildest dreams are being fulfilled. PR has replaced democracy. We consume images rather than participate proactively. The quango has replaced the referendum.

Late Man has no need of Demos. This is the age of the expert. Late Man has no need of principle. This is the age of the pragmatist.

But without Peoples and Principles you have amorphous, indifferent masses, leveled before the throne of equality, forcibly ruled by nothing higher than the un-rooted interests of elites. This is not dystopian in the conventional sense of the world, in fact it sounds like a fairly pleasant farm. But if you believe Man has a higher end than that of a farm animal, and that we should not be, as Weber warned, trapped in “an iron cage of rationality”, then it is certainly not a satisfactory curtain call to the grand endeavour begun by men such as Abraham and Socrates.

This technocracy is something Orwell saw coming from a mile off. The joke doing the rounds on social media is that that Nineteen Eighty-Four was meant to be a warning not an instruction manual, but it is received with a bitter, hollow laughter because we understand that the obfuscation has begun. Language has become malleable and reality with it. What’s worse is that nobody is quite sure who or what the puppet-master is or whether the herds are simply lurching purposelessly. Trends are transparent enough though.

Once only the fringes of opinion were considered taboo and controversial. Now even critical demeanor, aside from a self-prescribed and typically narrow scientific priesthood, is almost imperceptibly coming under attack. The soft umbrella terms are consensus and unity, the underlying reality is conformity and insincerity. Genuine intentions are hidden behind walls of unfathomable birtspeak, platitudes and the sheer size and length of paperwork.

Those that do challenge the “consensus” suffer ad hominem attacks, which usually work because very few people possess a flawless past, or the political goalposts are simply moved so that historically positive terms such as “progressive” mean little more than “x supports your agenda” and negative terms such as “reactionary” means that “x does not”.

The elasticity is classic Foucault. The elites have learned to wield power so effectively that it produces a culture that can be manipulated by its producers. It is nothing less than epistemological bullying, but it is incredibly effective.

Some refuse to be hoodwinked. Ludwig von Mises famously asked, “Who is ‘reactionary’ and who is ‘progressive’? Reaction against an unwise policy is not to be condemned. And progress towards chaos is not to be commended.”

They are the ones who will not stumble blindly back into the chains that the Enlightenment offered to break.

Follow Henry on Twitter @TheHolySmoke

Conservatives must convince people it is the disadvantaged in society they care about most

Dan Watkins 11.58am

With our history as a trading nation, Britain has long favoured open markets and economic liberalism. Even in the presently difficult economic times, a majority of voters still believe that capitalism is the best way forward.

But despite the Conservative party being the country’s foremost supporters of capitalism, over the past two decades it has consistently polled in the region of 30 to 40 per cent. So the party’s Achilles heel is not its economics, but its social policy - or at least the public’s perception of it.

Rightly or wrongly, the Conservative party is perceived as the ‘party of the rich’. Lower income groups are discouraged from becoming supporters, fearing the party is not interested in them. Furthermore, many better-off voters seek to allay their social consciences by shunning the Tories. The two diverse groups represent millions of voters but can both be addressed by focusing on the disadvantaged - and if done successfully could push the party above the critical 40 per cent level of support.

In fact, it is only the Conservative party that can truly transform opportunities for the disadvantaged - the people who most rely on the public services that are in urgent need of reform. The Labour party’s strong ties to the unions and the large swathes of leftist supporters within the Liberal Democrat party, prevent either from taking the radical steps needed to improve social mobility.

The Tories are unencumbered by those vested interests and care just as much about helping all members of society as any other politician. But crucially, it is the belief in policies that fit the grain of human nature that give the Tories a genuine chance of success. The use of the ‘carrot and stick’, or positive and negative incentive, is what needs shouting about.

For instance, with welfare we have long offered benefits to people when they fall on hard times. For some recipients the ‘carrot’ works and they soon return to work. But for many others, the money is taken with no serious intent of finding further employment. They will only respond to the ‘stick’ - such as the threat of enforced community work or reduced benefits.

Consider another area - education - where again we are putting sensible incentives into play. We provide positive incentives to children from poorer families by improving their quality of education received via free schools, academies and the pupil premium. Yet those pupils who do not respond, and who cause disruption, will now face newly-liberated heads who possess a greater range of sanctions for pupils and parents. Teachers will also face positive incentives in the form of differential pay, syllabus freedoms and greater powers in the running of schools - but also the threat of dismissal if they consistently fail to perform.

This can be applied to all public sector workers. The Conservatives sorely need to improve their support among this group at a time when necessary public spending cuts threaten to offer them only the ‘stick’, not the ‘carrot’ (such as decentralisation or mutualisation). Examples such as the Civil Service Pension mutualisation should act as blueprints for other state institutions.

Of course, Iain Duncan Smith and Michael Gove have already begun implementing such policies in welfare and education. But we need to spell out to people time and time again how these measures shall directly help families on lower incomes. Likewise for reforms to the NHS, local government and social services. The Government’s programme is not all about deficit reduction in the slightest.

The next three years offer many opportunities to focus relentlessly on the disadvantaged in British society and demonstrate to voters that it is these people the Conservative party cares the most about.

A Reply to Charles Moore…

Daniel Cowdrill 6.40am

The collapse of the banking system and the recent phone-hacking scandal have led some to question the wisdom of market forces.  In a now famous piece in the Telegraph, Charles Moore considers whether the Left were right all along about the free market being a ‘set-up’ designed to benefit only the rich. After recent events, ‘Everything is different now’ - but is it?

 In the post-war period the Conservative party was haunted by the memory of the ‘hungry thirties’ - a period of mass unemployment. This was compounded by election defeat in 1945, viewed by many on the Right as a delayed verdict on their economic policies during the wars.

Across public policy, but especially with the nationalised industries, industrial relations, and economic management, the Conservative party ceded ground to the left. Churchill focused his fading energies on establishing his position as an international statesman. The grand old man was not prepared to risk his reputation over a battle with the unions, and every effort was made to avoid confrontation. Tories fond of State planning, like Harold Macmillan, sidelined before the war yet profoundly affected by his time as a MP in the industrial north-east, were now promoted.

But had things really changed that much? As Andrew Roberts has argued, instead of treating the 1945 election as the freak result it was, Tory politicians were emasculated by it. They drew the false conclusion that it represented a turning tide which they were unable to hold back, even if they had wanted to.

There is a danger of the same happening again. Most Conservatives still believe that spontaneity is preferable to state direction, and that variation and competition lead not just to higher productivity but to a richer society. I assume that Charles Moore still believes these things. What disappoints me is his willingness to buy into a left-of-centre narrative of recent events.  We need to beware the false conclusion that confidence in the free market has collapsed.

 Some of those who benefited the most have certainly abused their power. Rupert Murdoch, once the heroic defender of a free press versus union intimidation, has presided over (unknowingly or not) allegedly corrupt and illegal practices at some of his newspaper titles. Bankers made reckless investments tied to the US subprime market. Some of our largest banks have been humbled. These are indelible stains on capitalism’s record but the lessons of the post-war period stand.

Between the end of the Second World War and 1980 the British economy was in relative decline. Harold Macmillan’s claim that we had ‘never had it so good’ and Harold Wilson’s ‘technological revolution’ belied lacklustre productivity, rising inflation, and deteriorating industrial relations. Mrs Thatcher’s governments changed course and Britain began to gain some lost ground.

Relatively unfettered markets and a relatively light, normative tax regime are a source of much higher growth and technical innovation than nationalised industries and are more compatible with democratic values than centralised bureaucracies.  The free movement of capital allows for the more efficient allocation of resources in an economy.  This allows for more entrepreneurship, innovation and job creation.  In a globalised market, those economies that are uncompetitive and protectionist will spiral into high unemployment and low growth, leading to sovereign debt difficulties, as Southern Europe is discovering today and Latin America discovered a decade ago.

In the 1970s, a new generation of economically liberal Conservatives made a vigorous case for de-regulated markets. As the economy struggles to adjust to recent hardships, this is the worst possible time to cede ground to the Left and thus allow the state and not the market to direct the economy.

Read more on this subject:

'I'm starting to think Charles Moore might be right, but not quite', by NIk Darlington (25 July)

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Bright horizons in Africa

Alexander Pannett 7.49am

A report by the African Development Bank has revealed that one-third of Africans are now “middle class”, defined as having between $2 and $20 to spend a day.  This marks an astounding increase in the prosperity of Africans since 2001, when it was true for only one-quarter of Africans.  It also suggests that there are good opportunities for the UK in trading with a continent whose growth rates are far outstripping those in the West.  Whilst the Prime Minister has been rightly applauded in making highly publicised trade tours to BRIC nations, he should not ignore a continent that has strong historic and cultural ties to the UK.

Using trade is a more effective method for stimulating development than handouts or cancelling debt.  Trade more directly stimulates an economy as money is more likely to pass over to those who have produced goods, whereas aid can all too easily be hidden away in Swiss bank accounts without ever reaching its intended destination.  In requiring goods, trade also stimulates methods of production, encouraging the growth of industry and agriculture.  Even Bob Geldof has got the message that trade trumps aid.  He is currently seeking to raise $1 billion for a private equity fund that will focus on Africa.

International finance is increasingly excited by the opportunities Africa offers.  In London, Helios Investment Partners, an investment firm founded by young Nigerians, is poised to close subscriptions to a $900m fund, so far the largest private equity fundraising exercise to target Africa. This comes as the much bigger Carlyle Group of the US is backing the continent for the first time, setting up in South Africa and Nigeria, the two biggest economies in sub-Saharan Africa.

The wealth of Africa is clear for all.  It has about 10 per cent of global oil reserves. South Africa has 40 per cent of the world’s gold. The continent has more than one-third of all known cobalt reserves, with many other base metals in abundance. China in recent years has sourced almost half its imports of alumina, copper, iron ore and oil from Africa, pushing up commodity prices.  The continent’s agricultural potential has hardly been developed.

To be fair, a closer inspection of the report by the African Development Bank will show that two-thirds of that supposed new middle class have just $2 to $4 per day.  Which does not leave much purchasing power for Western goods.  However, the recent surge in African commodity prices has coincided with the rapid expansion of banking, telecommunications and other services previously held back by a self-serving state apparatus. This and the poor rate of recovery in the developed world have encouraged investors from elsewhere, including Europe and the US, to reappraise their estimations of Africa.

With the growth of financial services, oil production and telecoms across Africa, the UK has the technology and expertise to both play a major part and benefit from the economic growth in the continent.  With nineteen African nations in the Commonwealth, Britain has an unprecedented opportunity to revive this organisation as a conduit for investment into Africa for the mutual benefit of all (as Nik wrote on Commonwealth Day).  David Cameron should direct the FCO and DfID to help British companies find African business partners and find markets for British goods and services.

As the recent financial crisis has discredited capitalism in the eyes of many in the West, Africa should be held up as a reminder of the social mobility that trade and rising economic activity can engender in a people long denied the opportunity for prosperity.  It is trade not aid that allows a community to raise itself out of poverty: a lesson that should not be lost on some of the poorer regions of the UK.

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