‘Sustainability’ Archive

Can fossil fuel companies be in a socially responsible fund?

Saturday, April 27th, 2013

I was recently sent a survey by a socially responsible investing (SRI) advising group, asking what approach I preferred for including or excluding fossil fuel extracting, refining, and marketing companies from SRI portflios. In a nutshell, the choices were 1) drop them all now, 2) drop them all soon, or 3) keep them all.

I’d have liked to have seen at least one question about trying to rank the fossil fuel companies from worst to best (least bad), and using conscious selection of ecologically better companies for candidates to include in the portfolio.
A set of ideas I learned from listening to prominent eco-activist groups is:

  • You don’t have much influence on a company if you just wag your finger and say “You’re bad.” You give them no way to respond except to shrug.
  • You can influence them by saying “We didn’t invest in you, but did invest in company X, because they follow policy Y and you don’t. If you adopt Y, you’ll be on the ‘includable’ list.”
  • Keep the target moving forward. Whatever the most progressive practices in the fossil fuel industry are, push everyone to adopt them.

Eco-active groups have tons of data on who and which policies they dislike most, and why. I think we in the SRI corner of the investing industry need to start using that.

 

Another aspect is that I want this fund’s Social Responsibility definition to be free of b.s. and hypocrisy. As an individual and a founder setting the culture of a company, I make an effort to be a responsible consumer. At this point in our society, though, fossil fuels are woven into everything we do, even when we try to live a low-footprint life. For me, it doesn’t make sense to say “no fossil fuel companies, no way” when in fact I use fossil fuels every day. Instead, I try to use as little as possible, try to use greener energy when possible, and as described above, try to get the fossil fuel portion of my energy needs from companies that are at the leading edge of responsibility in their industry.

An easy example here is coal companies. Coal is by far the dirtiest, highest-CO2-producing fuel we available commercially. It also tends to be one of the dirtiest, most ecologically disruptive to mine. Coal companies would be off my “ok to invest” list until such (hypothetical) time as they can make “clean coal” a technological reality rather than a hollow misleading public relations slogan. They have a lot of work to do to get there.


Sustainability Interview

Monday, March 12th, 2012

I was interviewed a few weeks back, by the sustainable innovation group InnovatingSMART. It’s on the web now, and I like it. Click anywhere below to see it.

Innovating Smart banner logo
Rick Drain, Founder of Longsplice Investments – InnovatingSMART
www.innovatingsmart.org


THE INNOVATION:
A former computer chip design engineer turns his math skills toward managing a socially-responsible mutual fund. Longsplice Investments is a mutual fund company that explicitly emphasizes selection of portfolio companies that are good corporate citizens.


Does investing ‘Nice’ pay?

Friday, February 24th, 2012

The most frequent question about Socially Responsible Investing is “how much profit are you giving up by playing ‘Nice’?”
Answer: None. In fact, there’s extra profit in SRI.

Other studies have reached the same conclusion, but here’s a new one by Harvard Business School as reported by Tom Randall of Bloomberg.com:
Saints Beat Sinners for Sustainable Investing: Stock Chart



How Investors Push Sustainability

Saturday, February 18th, 2012

Corporate managers act as if they’ve forgotten sometimes, but shareholders are the owners of companies. As owners, they directly select the the Boards of Directors who hire and oversee management. Shareholders may want to give management orders about corporate behavior. In practice, shareholders are a diffuse power, with indirect control, and management usually follows their own agenda.

Shareholder resolutions provide a way for a group of shareholders (owners) to put a directive to a vote by all the shareholders.
Among other uses, this is one of the ways that Socially Responsible Investors push management to make the companies behave more responsibly.

Ceres leads a national coalition of investors, environmental organizations and other public interest groups working with companies to address sustainability challenges. Part of their effort is to organize shareholder resolutions. Some pass, some don’t, but they all send a message to management about shareholders’ desires.

Graph of Ceres shareholder resolutions by year

 

Click here to read the article:
Ceres Shines a Light on the Power of Shareholder Proxy Votes