Put off by corporations willing to set aside environmental standards in favor of making a profit? Seeking to invest in companies demonstrating eco-leadership on matters such as climate change, water scarcity, forest and wetland preservation, wildlife protection, mining operations, and agricultural practices? You're not alone. The Social Investment Forum believes that at least 9 percent of all investment decisions made today include some survey of the social and environmental costs.
In years past, corporations showed little interest in operating sustainably, believing it would hurt the bottom line, which left the average investor having to choose between the lesser of many eco-evils. However, recent trends show that this is no longer the case. Corporations are jumping on the eco-bandwagon in an effort to cash in on the financial opportunities inherent in sustainable business management, giving everyday investors more green opportunities than ever before. Whether you're looking to put your money into mutual funds or stocks, you should be able to find a money-maker that'll also satisfy your green sensibilities.
Needless to say, not all geographic sectors are seeing equal growth in green business strategy. A November 2007 study published by RiskMetrics assessed the environmental and ethical policies of over 1,700 companies found in the S&P 500, the Toronto Stock Exchange 300, and the Morgan Stanley EAFE index. It showed that although US companies tend to have more ethics policies in place, in practice European companies outperform their US counterparts in environmental sustainability.
Investors in US companies may find solace in another study recently conducted by Ceres, a network of investors and environmentalists, that showed US companies beginning to close the gap. Have you observed the new green vehicles rolling off the lines? Noticed energy- and water-saving home appliances becoming more readily available? Heard impressive green-cash promises from the biggest companies around? Eco-friendly offerings are becoming more mainstream as companies like Ford, General Electric (GE), and American Electric Power begin to dip their corporate feet in the green pool. And many more green investment opportunities are likely to appear on the horizon in the future. From 2005 to 2007, socially responsible investing grew some 18 percent in the US, as compared to overall investment growth of just 3 percent.
Want to do more than prop-up environment-neutral companies? Are you searching for investment opportunities that will actually leave the earth better than you found it? Growing consumer interest along with expanded government subsidies are making smaller green-focused companies increasingly attractive, especially in the clean energy market. From companies developing ever-smaller, ever-more-efficient solar technologies or fuel cells to those researching manufacturing processes that add ultra-clean water back to natural systems, opportunities abound.
Much of the growth is occurring in clean energy technologies (wind, solar, biofuels, fuel cells, and hydro-electric power), and although the link to the oil market makes some investors nervous, long-term forecasters are predicting steady growth in this sector over the next decade. In 2006, $727 million was invested in 39 new US alternative energy start-ups, a marked increase from the previous year, and the solar power market is set to grow by 50 percent every year until 2010.
Some financiers express concern over the perceived lower rate of return of various green investments. Although there hasn’t been a comprehensive analysis of their performance, Morningstar attempted to assess green against the competitors in 2006, indicating that the eco-friendly options gave a 7.6 percent return, whereas the broader market gained 9.7 percent.
Big companies frequently tout new environmentally friendly products to boost their reputation and investor relations, but are often haunted by criticisms that their products return a rather understated green bang for the buck.
TerraChoice, an environmental marketing firm, recently published a report criticizing most of the 1,018 products they surveyed for falling into one or all of the “Six Sins of Greenwashing.” They argued that of the 1,753 eco-claims made, 99 percent of them were misleading in one way or another—everything from irrelevant assertions (like stating they do not contain already-banned substances such as CFCs) to outright lies (claiming organic certification that is not verified in any way).
Suing to keep you in the dark
Corporate disinformation campaigns aimed at glossing over environmental concerns and silencing techniques used to keep people quiet about eco-issues often cloud investor decisions. For instance, on her April 16, 1996 show, Oprah Winfrey attempted to draw attention to the public health hazards of mad cow disease, or bovine spongiform encephalopathy (BSE), after which cattle prices dropped dramatically. In a move to salvage their reputation, feedlot owners filed suit against Oprah, one of the first of many Strategic Lawsuits Against Public Participation (SLAPPs). Concerned citizens now fear that SLAPP lawsuits make it easy for corporations to hide potentially damaging information that would otherwise influence shareholder activity.
More recently, bank users were faced with confusing propaganda about the two largest banking institutions in the world. In 2007, both CitiBank and Bank of America announced their commitment to spend billions in an effort to combat climate change.
Yet despite highly publicized statements about their green financial commitments, the Rainforest Action Network (RAN) asserts that these moneylenders are pulling the green wool over investors’ eyes. RAN believes these environmental announcements are an attempt to hide their participation in a new “Coal Rush” that could result in the construction of over 150 US coal-fired power plants and upwards of $50 to 90 billion per year in associated social and environmental costs. RAN points out that although Citi has pledged billions of dollars (0.2 percent of their assets) to address climate change, they continue to spend 200 times more on dirty energy. Likewise, Bank of America spends 100 times more on dirty energy than on clean energy initiatives, investing heavily in mountaintop removal mining companies, big greenhouse gas emitters, and other environmental offenders.
Different shades of green
Some have lodged serious criticisms against SR investments, claiming that green options often invest in environmentally unsound industries such as oil and gas and that they rarely include progressive companies such as organic food producers or alternative energy firms. Individual investors should be aware that stocks, funds, and money managers will vary in their depth of environmental commitment, being careful to investigate individual investment options to find the one that best fits their moral values and financial goals.
- Ceres Works to network investors with environmental organizations and public interest groups to cooperatively work on environmental challenges.
- Co-op America’s Social Investing information A nonprofit member organization working to use economic power (consumer, investor, business, marketplace) to stimulate a just and sustainable world.
- Environmental Finance A monthly periodical addressing investment-related environment issues.
- Green Money Journal A quarterly publication that gives tips and current events in the investing world.
- Investor Network on Climate Risk A $4 trillion network of investors promoting understanding of climate change’s risks and opportunities.
- Investing with Your Values - A books that covers most investment options and how to get into the money making game without compromising your values.
- Social Funds.com Publishes news, daily market trends, and investment research, and gives performance information for 75 socially responsible mutual funds.
- Social Investment Forum Encourages responsible investing by evaluating various mutual funds against a variety of indices.
- Social Investment Organization A Canadian member organization working to promote socially responsible investing.
- Sustainable Business.com Publishes a monthly newsletter read by many green money managers, and reviews company financial and environmental performances.
- TerraChoice An environmental marketing firm with an EcoBuyer Database that might be useful in investment research.
- United Nations Conference on Trade and Development 2000 This site offers a direct link to the discussions and topics covered in the conference.
- Environmental Finance - Drinking the oceans is no quick-fix for a thirsty world (WWF)
- Environmental Finance - Coca-Cola to become ‘water neutral’
- Business Energy - Palm oil certification scheme launched to criticism by environmentalists
- United Nations Conference on Trade and Development - Investment liberalization and environmental protection
- Resource Investor - Government, Community Relations & Environment Key Asian Mining Issues
- EcuadorExplorer.com - The Mining of Ecuador: Mining the Third World
- World Wildlife Fund - Better Management Practices: Work with companies to "Green" their supply chains
- National Resources Defense Council - My Money Is Greener Than Your Money
- Ceres - Corporate Governance and Climate Change: Making the Connection
- Social Funds - Sustainability Issues All Over the Map at Large Cap Companies
- Social Investment Forum - Report: Socially Responsible Investing Assets
- Financial Times.com - Green investment is still in its budding stage
- News Target.com - Investment in green technology on the rise nationwide
- Environmental Finance - Sarasin predicts strong growth in solar PV
- National Resources Defense Council - My Money Is Greener Than Your Money
- TerraChoice - The Six Sins of Greenwashing: New Study Finds Misleading Green Claims in 99% of Products Surveyed
- Environmental Finance - All but one product fails greenwashing survey
- The Green Guide - How Corporations Disinform Consumers
- SocialFunds - Banking on the Future: The Two Biggest US Banks To Dedicate Billions to Halting Climate Change
- Environmental Leader - BofA Expands Hybrid Allowance to All U.S. Employees
- Rainforest Action Network - Banks, Climate Change & the New Coal Rush (see page 4)
- Rainforest Action Network - Banks, Climate Change & the New Coal Rush: Citi (see page 5)
- Rainforest Action Network - Banks, Climate Change & the New Coal Rush (see page 6)
- Rainforest Action Network - Bank of America Showcases Dirty Investments
- CNNMoney.com - Are green funds true to their colors?