In an increasingly uncertain world there is a tendency for the narrative to become more inward looking. A fear of immigration, an unease about security and potential foreign sources all contribute to a reluctance to reach out. Yet there is no hiding from the real root problem of continued poverty and inequality around the world and how this supports the conditions where flashpoints can happen, which in turn create the concerns mentioned above.

Now more than ever we need to be providing constructive aid to populations in the developing economies to allow them to move forward in order to enjoy the opportunities and environment that we take for granted.

Whilst Government Aid and that provided by the Large Charities serves a purpose in supporting infrastructure and development on a wider scale there is sometimes a slight scepticism and lethargy amongst the public in supporting these. In particular these is a fear that aid can be politicised and mis-directed.

A positive alternative to this is in the area of micro-finance, a structure that is being supported by the SRI fund management industry. A micro-finance organisation is one that provides financial loans and services to low income populations in the world. As the word suggests they work on a very localised level having very supportive relationships with their clients. This results in communities being able to improve economically but in their own way.

More and more of these MF organisations are funded via larger fund management groups, interested in developing this type of responsible investing. Triodos Bank, for example have been supporting microfinance for a number of years. Currently 15.5 million clients around the world are being supported by loans with a further 8 million benefitting from  savings contracts. They do this by financing 100 MF institutions in 45 countries.

An example would be that of the MF known as Dawn operating in Myanmar (previously Burma). In fact this is jointly owned between Triodos, Dutch Development Bank FMO, and American impact investor, Accion. As one of the few MF organisations in this deprived part of the world, its aim was to provide financial support and services to as many as possible. To date they have reached up to 54,000 individuals. UK retail investors can access MF deals like this via the Triodos bank account or via Triodos investment funds.

In addition to supporting a better standard of living MF organisations help to stimulate entrepreneurism and the self -esteem that this brings.

This is an activity supported by UK fund manager Alquity (again which can be accessed by UK investors). An example of this is via a MF organisation known as Gentera, a stock held within their Latin American fund. Gentera are a Mexican based organisation providing loans to small businesses and co-operatives in Mexico, Peru and Guatemala. Via their extensive network of highly motivated loan officers (Voted first in Mexico’s 2016 great places to work survey) the aim is help businesses grow by providing access to the first step on the credit ladder and providing entry to the formal economy. In a recent Alquity newsletter they refer to a visit they made with loan officers from Gentera  to a low income neighbourhood in Mexico city. They mention a local bakery which has been financed as part of a co-operative. The credit has allowed supplier financing allowing stock to be increased to and the business to become sustainable.

From an investment point of view this successful business model has paid healthy returns for investors like Alquity. For example Gentera are currently showing a return on assets employed of 26%.

In addition these MF organisations carry a strong ethical code towards social practices and environmental management. As a result they are able to educate their clients to create a healthy social and environmental businesses from their roots.

In the future it’s possible that companies in the current developed world will be learning from these fledgling emerging businesses. That will be a turn up but something worth supporting.

Please subscribe for further newsletters

The thing I find most galling about the current behaviour revealed from the tax haven in Panama is that the Media and General Public are in anyway surprised !

Ever since medieval times, when taxes were first introduced there has been a desire by some to avoid paying what is due.

Of course there is a huge difference e between a slightly cheeky peasant evading the grip of an oppressive landlord and the current rich elite hiding millions today in a shady offshore haven. Greed is Greed and some will always revert to this.

why are we paying tax! Yes there is a general awareness that we need to pay for public services and roads etc., but I sense that a sort of negative haze has envelopes this sort of funding. We have become very cynical about how much good is actually being achieved. This of course has not been helped by the deficit we are still meeting but there is a view that money goes into a black hole and never sees the light of day.

So here’s a thought. Why don’t we refer to tax as a contribution? More specifically it could be broken down into certain areas such as a ‘Health Contribution’ (as for example they have in Scandinavia).This I believe would start to change the mind-set of something we have to give to something we feel is worthwhile giving to.

Of course this is more than just a name change. We as individuals need to feel a greater connection to what we are achieving as a society. Therefore is it beyond the realms of possibility for Government to produce a statement explaining what is being ring-fenced and where. Maybe this could be automatically triggered by e mail once a tax return has been made. This of course is not dissimilar to what local councils are already doing in conjunction with council tax.

Of course there are legitimate ways of saving tax. The everyday financial services industry relies very heavily on such tax planning. But again these can perhaps be presented in a more positive light. For example tax relief granted on a pension contribution could be argued as a contribution rebate. This rebate applying because it is saving potential retirement planning offered by the State.

If we can start to look at tax planning this way then perhaps we will all start to value our role in society in a much healthier way and a better society makes a better life for all of us.

If you wish to read more articles like this please subscribe for future newsletter

]]> https://richardessex.co.uk/its-a-contribution-not-a-tax/feed/ 0 https://richardessex.co.uk/tobacco/ https://richardessex.co.uk/tobacco/#comments Thu, 22 Jan 2015 12:21:27 +0000 http://richardessex.co.uk/?p=2653 A Breakthrough.

The Non SRI  Market starts to take note with regard tobacco stocks.

Over recent months I have seen a number articles from SRI fund managers querying the financial future of tobacco stocks indicating ,perhaps , the start of the real decline in these unwanted commercial giants.

However I still sense there is a whiff of scepticism amongst the wider investing public that somehow whatever is thrown at the industry it will survive as a good old defensive stock that will always hold up when economies get sticky.

Perhaps however the tide is finally turning. Below is an article from Stephen Bailey , analyst with the fund group Liontrust. Liontrust have no bias towards SRI, and as far as I know have never been mentioned as being remotely interested in this area.

Yet the article clearly explains why holdings in British American Tobacco and Imperial Tobacco were sold in November 2012. Simply put hard qualitative analysis showed that political, social and economic factors are now major challenges for these organisations. In particular these are challenges are being set in the very emerging markets where these organisations have set out their stall. There is also a recognition that the market has not fully valued in these potential long term problems.

These kind of articles are great endorsements for the SRI industry and show that many SRI analysts have been ahead of the curve on this.

Source: www.liontrust.co.uk