Article date: 3 January 2006
Clare Brook, head of socially responsible investment for NorwichUnion, comments on the main investment themes for 2006.
Climate change, carbon dioxide emissions and the energy challengewill continue to be a key theme for socially responsible investorsin 2006. We expect more incidents of extreme weather includingcolder-than-average winters, hotter-than-average summers, storms,floods and hurricanes.
The oil price is likely to remain high and this will putpressure on high energy users, particularly in manufacturing, wherethe cost of carbon dioxide emissions is also rising.
The debate about the future of nuclear energy will also becomeincreasingly vocal. Supporters will be pushing the Governmentto embrace nuclear power as a ‘clean’ alternative tofossil fuels, but we predict an increasing backlash fromenvironmentalists and sections of the public who would prefergovernment investment to be spent on local energy solutions such assolar panels, small scale wind turbines, as well as larger scalesolutions such as offshore wind and tidal power.
We will avoid re-insurers who are likely to be hit by the cost ofincreased storms and extreme weather, and high energy users whowill bear the brunt of higher oil prices. This includesairlines, car manufacturers focused on production of heavyfuel-using vehicles and heavy industry. We favour alternativeenergy companies, including solar, wind, wave, tidal, hydro, biofuels, fuel cells and other hydrogen technologies, and leaders inmanaging energy efficiency, thermal insulation manufacturers anddistributors, metering and control equipment, and carbon dioxidemeasurers.
Obesity: Wepredict increased legislative pressure on manufacturers ofunhealthy food. There will be restrictions on advertising ofunhealthy food to children and an improvement in school food. This will have a negative impact on companies making sweets, fizzydrinks and fast food. Meanwhile, healthy food manufacturerswill continue to thrive. There will be more scrutiny of salt,sugar and fat content of foods and clearer labelling to keepconsumers better informed. We anticipate that there will bediscussion of a tax equivalent to that on tobacco and alcohol onhigh-fat foods to fund the increasing demands that obesity isplacing on the health service.
Ageing population: There will be a growingdemand for healthcare solutions, including hip and kneereplacements and treatment for many chronic conditions. Thereis unlikely to be a major break-through in making diseases such ascancer far more treatable. Drug companies will come underincreasing pressure to provide access to essential medicines indeveloping markets following the lead of Glaxo in providing cheaperAIDS drugs to South Africa.
Drinking and smoking: We predict the governmentwill continue to be concerned about the wider social impacts ofbinge drinking. Alcohol manufacturers and vendors may becalled upon to be more accountable as external costs of policingand hospitals may be passed onto them. In advance of thesmoking ban being widely enforced in England, more pubs andrestaurants will adopt a voluntary ban, leading to a decline in thenumber of smokers in the UK.
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About Norwich Union’s socially responsibleinvestment team
Norwich Union has seven sociallyresponsible investment funds. Its socially responsible team isbased at Morley Fund Management and is one of the largest and mostexperienced 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 aleading provider of life, pensions and investment products and oneof the largest Financial Adviser (FA) providers. FAs provideover 70% of the company's long-term savings business in the UK.
Norwich Union has strategic alliances with building societiesand other leading UK brand names including CIS and The Royal Bankof Scotland Group. Norwich Union’s news releases and aselection of images are available from Aviva's internet presscentre at www.aviva.com/media.