Investing in Green business
The New Zealand Business Council for Sustainable Development is urging New Zealand businesses to be aware of a growing trend for investors to avoid companies that aren’t actively reducing their carbon emissions.
According to the Council:
Investment houses are setting up scales to carbon rate companies; one of the world’s largest insurance firms is staking out new policies to invest in companies attracting internationally tradable carbon credits and climate change investment is about to impact on the managed funds industry.
This trend is great news, and I hope it catches on in New Zealand.
A note of caution though: with a trend like this comes the risk that unethical companies will pay lip service to environmental concerns to attract green investors and consumers without changing the things that are fundamentally wrong with the way they do business. For example, the Council quotes Wal-Mart as an international example of a business trying to reduce its carbon emissions by 25 percent. Yet closer scrutiny of Wal-Mart’s environmental record suggests that the news is not quite so good. More at www.walmartwatch.com.
July 31st, 2006 at 6:07 pm
Carbon Dogs indeed!
Caution is warranted, I agree Frog, but the reality is that for large organisations the potential saving on “business infrastructure costs” through carbon reduction measures is massive. A couple of articles on The Globalist site are worthy of reading for a “scale” perspective: http://www.theglobalist.com/storyid.aspx?StoryId=5527
The risk is of muddling two issues here. WalMart, like most large format retailers, have opressive purchasing practices. I’ve posted of these issues before:
http://shoppingfix.blogspot.com/2006/03/driving-down-price-this-is-lit tle.html
and:
http://shoppingfix.blogspot.com/2006/06/retail-madness-am-i-so-detache d-from.html
Purchasing is only related to “business infrastructure costs” insofar as they are marketed (in this instance) under as single brand “WalMart”, and that transport and purchasing are of course related (again, see the Globalist article for perspective).
NZBCSD are talking about “busienss infrastructure costs” as a green issue, not about the social implications of things like purchasing practices - which is a large reason for anti-WalMart sentiment. The green ethic rightly includes social impact, but lets not confuse what the Scoop article addresses.
As a “price for carbon” becomes more certain, those businesses that dont address their exposure to the forseeable (carbon pricing, energy security, etc) are at significant risk. Insurance (and re-insurance) companies are now choosing not to cover where these risks have not been addressed. So rather than costing a bomb, lowering their carbon footprint is significantly lowering “busienss infrastructure costs” (which would include insurance).
It makes economic sense for businesses to lower their carbon footprint. Its all about risk. Lets give credit where its due. Big business runs the planet, so lets applaud a win and look forward to the next match.
Greenwash is a separate issue that is equally important. Just not in this context…
Mike
August 1st, 2006 at 10:22 am
ahem…those interested in this large/unwieldy topic of ‘green business’ could go to whoar.co.nz and avail themselves of the search facility…using those words..
there they will find more stories/links on green business than they can poke a stick at…stretching back to feb 2005…
(ahem..)..i would like to note there is not a shred of self-promotion in my passing this on to you…
(he said…blushing ever so slightly..)
phil(whoar.co.nz)
August 2nd, 2006 at 8:32 pm
Beware “Socially Responsible Investing” (SRI) & “Ethical” funds. Many of these have highly questionable names included in the portfolio…e.g Nestle, and banking giants who are no doubt lending to companies that wouldn’t make it in to any SRI fund. Not so transparent is it…Fund manager entry criteria is very much subjective & debatable. Many names are included purely on the back of some well written “sustainable” & “corporate governance” policies… There are plenty of genuine “green” stocks to invest in on an outright basis rather than via an SRI or Ethical fund which typically charge up to 5% p.a for the privilege of managing your money and often with extra performance related fees on top. Do your own dudiligence very carefully.
August 3rd, 2006 at 9:13 am
Fair call Boot.
I can only recall one local listing to explicitly publicise as a responsible investment. NZ Windfarms IPO last year. Are there any others? (It’d be interesting to know whether fund managers saw Waste Mgmt as a responsible investment prior to de-listing).
M
August 3rd, 2006 at 10:17 am
I remember seeing in a Green newspaper an ad for “ethical investments” but I can’t remember any of the details..
August 4th, 2006 at 10:33 am
Mikeymike
Within NZ there are very few candidates, at least listed co’s whose shares trade on NZX. Waste Management was included in some SRI funds, as is it’s new Australian owner. Personally I’d be doing more dudiligence on this name before investing as I’m not 100% sure how effectively (at least re environmental impact) waste is disposed, not to mention checking other lines of businesses the new owner operates.
Prometheus (Napier based) promotes itself as “Ethical Finance” & “Investing in Sustainability”. Looking at who they have lent to, they do seem to operate along strict criteria. The public can get involved by lending money to Prometheus via savings accounts etc, but frankly the rates of return (considering underlying credit quality/risk) would struggle to keep up with inflation, not even allowing for tax. http://www.prometheus.co.nz/noflash/rateschedule.html
It’s all very well investing in SRI/ethical schemes, but the risk/reward ratio has to make better sense…especially when according to the recently published 1st edition of “The Real Bottom Line” from The Green Party, (excellent reading BTW) Prometheus have been chosen as the preferred finance provider for the Energy Efficiency and Conservation Authority’s solar water heating finance prgramme, “charging just 11% (compared with market rates of 15% or more)…” Nice work if you can get it!
Most opportunities are offshore, so currency risks and proposed changes to tax all need to be considered…
I found one US based fund which seems to have very strict investment criteria. See link for most up to date portfolio lisiting which is a good starting point.
http://www.newalternativesfund.com/returns/returns_list.html
Also:
http://www.sustainable-investment.org
You can check top-10 holdings fund by fund. Heaps of names you have to wonder about…but some genuine candidates as well.
Closer to home:
http://www.eia.org.au/html/s02_article/article_view.asp?id=199&nav_cat _id=145&nav_top_id=57&view=&history=1&gback=home&dsa=364
Via various links, you can check various fund managers portfolios.
Happy reading/investing…
Boot
August 4th, 2006 at 10:38 am
Wow, thanks for such an informative post, Boot. I am looking forward to checking out your links.
August 4th, 2006 at 3:47 pm
Yeah, wow!
My very 1st blog post was about the dilemma I had in finding a “responsible banker” for the charitable trust which runs our project. I ended up going Kiwi Bank, but for social rather than any explicit environmental values.
At that time Westpac were listed in the Global 100 - “most sustainable corporations in the world”.
http://www.global100.org/
There’s some scary names on the list, and in a back-at-ya kinda way frog, I’m left thinking about greenwash. Funny that!
M