Soaring petrol prices good news for ethical investors. Rising fuel costs are driving commuters out of cars onto public transport and helping boost the performance of bus and train operators.
Leading socially responsible investment (SRI) fund manager, Mike Fox, believes record oil prices will help investment returns from public transport companies travel further. The outlook for the sector is made more compelling by the potential to win new overseas franchises which are being opened up to private companies for the first time.
Several UK operators have already built a reputation for improving standards of public transport abroad and should be will placed to benefit. While if proposed congestion charging is extended to UK cities outside London, it would see significant new investment in public transport through the Government's Transport Innovation Fund (TIF).
There are also some excellent opportunities for bus and train providers to grow their businesses as other countries follow the UK's lead by opening up new overseas franchises for the first time.
Fox cites two companies that he believes are well placed for growth.
Arriva - Has delivered a return of 32.1 per cent over three years to 31 May 2008. It has also spent around 10 years building up its position in Continental Europe and is now strongly placed to benefit from the opening up of overseas franchises. It recently won the UK's Cross Country franchise.
National Express- The UK bus, rail and coach operator provided a return of 17.2 per cent over 3 years to 31 May 2008. It is now the second largest operator of school buses in the US and recently entered the Spanish bus market with the acquisitions of Alsa and Continental Auto.
The CIS Sustainable Leaders Trust - which can be used to fund an isa - provided a total return of 43.80 per cent for the three years to 31 May 2008, above the 33.25 per cent achieved by the UK All Companies sector, and the 37.07 per cent return of the FTSE All-Share Index. It invests in companies whose products and services are beneficial to the environment and human welfare, which makes public transport an important focus for the fund.
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