News
UK: Socially responsible investment outlook for 2006
03 January, 2006
Clare Brook, head of socially responsible investment for Norwich Union, comments on the main investment themes for 2006.
Energy
Climate change, carbon dioxide emissions and the energy challenge
will continue to be a key theme for socially responsible investors
in 2006. We expect more incidents of extreme weather including
colder-than-average winters, hotter-than-average summers, storms,
floods and hurricanes.
The oil price is likely to remain high and this will put pressure on high energy users, particularly in manufacturing, where the cost of carbon dioxide emissions is also rising.
The debate about the future of nuclear energy will also become increasingly vocal. Supporters will be pushing the Government to embrace nuclear power as a ‘clean’ alternative to fossil fuels, but we predict an increasing backlash from environmentalists and sections of the public who would prefer government investment to be spent on local energy solutions such as solar panels, small scale wind turbines, as well as larger scale solutions such as offshore wind and tidal power.
Investment conclusions
We will avoid re-insurers who are likely to be hit by the cost of
increased storms and extreme weather, and high energy users who
will bear the brunt of higher oil prices. This includes
airlines, car manufacturers focused on production of heavy
fuel-using vehicles and heavy industry. We favour alternative
energy companies, including solar, wind, wave, tidal, hydro, bio
fuels, fuel cells and other hydrogen technologies, and leaders in
managing energy efficiency, thermal insulation manufacturers and
distributors, metering and control equipment, and carbon dioxide
measurers.
Other themes
Obesity: We
predict increased legislative pressure on manufacturers of
unhealthy food. There will be restrictions on advertising of
unhealthy food to children and an improvement in school food.
This will have a negative impact on companies making sweets, fizzy
drinks and fast food. Meanwhile, healthy food manufacturers
will continue to thrive. There will be more scrutiny of salt,
sugar and fat content of foods and clearer labelling to keep
consumers better informed. We anticipate that there will be
discussion of a tax equivalent to that on tobacco and alcohol on
high-fat foods to fund the increasing demands that obesity is
placing on the health service.
Ageing population: There will be a growing demand for healthcare solutions, including hip and knee replacements and treatment for many chronic conditions. There is unlikely to be a major break-through in making diseases such as cancer far more treatable. Drug companies will come under increasing pressure to provide access to essential medicines in developing markets following the lead of Glaxo in providing cheaper AIDS drugs to South Africa.
Drinking and smoking: We predict the government
will continue to be concerned about the wider social impacts of
binge drinking. Alcohol manufacturers and vendors may be
called upon to be more accountable as external costs of policing
and hospitals may be passed onto them. In advance of the
smoking ban being widely enforced in England, more pubs and
restaurants will adopt a voluntary ban, leading to a decline in the
number of smokers in the UK.
Ends
Press office contacts:
David Gwyer 01904 452828 Out of hours 07800 699508
James Evans 01904 452791 Out of hours 07800 699525
Rob Pell 01904 452659 Out of hours 07800 699563
Cheryl Cox 01904 452617 Out of hours 07800 695275
About Norwich Union’s socially responsible
investment team
Norwich Union has seven socially
responsible investment funds. Its socially responsible team is
based at Morley Fund Management and is one of the largest and most
experienced in the UK. The team is lead by Peter Michaelis.
About Norwich Union
Norwich Union is one of the UK's biggest insurers. It is a
leading provider of life, pensions and investment products and one
of the largest Financial Adviser (FA) providers. FAs provide
over 70% of the company's long-term savings business in the UK.
Norwich Union has strategic alliances with building societies and other leading UK brand names including CIS and The Royal Bank of Scotland Group. Norwich Union’s news releases and a selection of images are available from Aviva's internet press centre at www.aviva.com/media.
