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Ditching fossil fuels will pay off: Fund manager

A decision to end investment in companies producing or distributing fossil fuels should pay off for investors over the medium to long-term, says Hunter Hall Investment Management’s chief executive.

Wednesday, June 4th 2014, 6:00AM

Hunter Hall has announced it is amending its investment screen to end investments in fossil fuel companies.

It already excludes investment in companies directly involved in tobacco, gambling, armaments, uranium, nuclear energy, forestry of old growth forests and intensive animal husbandry.

Hunter Hall will implement this enhancement to its ethical policy by excluding companies with a Global Industry Classification Standard of Oil, Gas and Consumable Fuels. This classification accounts for 8% of the MSCI World Index and currently represents 2.2%  or two stocks of Hunter Hall’s overall portfolio.

Chief executive David Deverall said the manager was in the process of selling the two stocks affected.

He expected limited impact on investment performance over the short term.  “The investment universe is very large, there are plenty of other parts of the global sharemarket to invest in.”

Over a medium to longer-term, he said such a strategy could help investors avoid investing in companies that ended up with “stranded assets” – coal and gas reserves worth billions on balance sheets that ended up being worth a lot less in reality.

“We’re hoping that by not owning those stocks, over the long term [funds] will perform better.”

The response from investors had been positive, he said.

Over time, those companies Hunter Hall was rejecting would find it harder to raise capital and it was possible that would influence the types of projects they were able to invest in, he said. “Every journey starts with a small step.”

Hunter Hall was not specifically seeking renewable energy companies to invest in instead, but would when they offered an opportunity to make money, Deverall said.

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