Ambrose Desmond runs sustainablog’s green investment subdomain.
The socially responsible and green investment market has grown exponentially over the past 20 years and now makes up over 11% of all assets under professional management. Yet despite all of its growth, research shows that this market is far smaller than it would be if investors were fully informed about how competitive the returns can be. Luckily, this inefficiency could pay off for those investors who stay ahead of the curve.
Green investment produces comparable returns
In a study by Yankelovich in 2006, 87% of investors said that they would prefer investing in socially responsible assets if they believed they would receive an equivalent return. Since the actual percentage of investors in socially responsible vehicles is far smaller, one can assume that they are operating under the belief these investments return lower than market rates.
This assumption is plainly not true. Dozens of peer-reviewed studies over the past 30 years have compared the returns between socially conscious investments and the market as a whole. They have compared both negative-screened funds (ones that remove objectionable companies such as weapons manufacturers or tobacco) and positive-screened funds (ones that select companies for their positive attributes such as alternative energy and family-friendly workplaces) to the S&P500 or the Dow and found over and over that socially responsible and green investments produce equivalent returns. Some studies have even found a small (although statistically significant) positive correlation between social responsibility and financial performance.
This means that far more people would want to enter the socially responsible investment market if they only knew they would not be sacrificing performance. How many? If we use the numbers from the Yankelovich study, the socially responsible investing market would grow by 790% if investors learned that they could expect equivalent results. Such a shift in investment allocation would have huge ramifications on corporate behavior.
Imagine if more than 85% of Wall Street assests were invested in socially responsible and green businesses. The impact of this shift on the environment, human rights and democracy would be enormous. Moreover, if the Yankelovich study is accurate, such a shift would not require a change in values, but merely the information that socially responsible and green investments produce equivalent returns.
If you are looking for ways to move your investments into socially responsible assets, it can be helpful to talk things over with a professional. There are numerous firms that specialize in conscious investing such as Natural Investments.
Image credit: http://www.flickr.com/photos/bdjsb7/ / CC BY 2.0
It only makes sense? There is a fund for the sinner companies like booze and cigarettes, why not have a earth-friendly or a green fund. Great idea.
Hey! Could you tell me where I could find more companies like natural investments. I have some really big ideas and business plans but I just don’t know where to go! Angel investments? My idea is conscious, fair and sustainable- Harrison
George R. Gay
SRI in the Rockies is the annual conference for the sustainable and responsible investment industry in North America. 600 plus SRI professionals will gather this year in San Antonio from November 18-21. Information about 60 sponsors is available on the web-site.
Inisight Group Plc
Renewable energy to grow by 53%
By 2035 China and India’s energy use is expected to double and the world’s energy consumption is expected to grow 53 percent, according to the International Energy Outlook 2011 (IEO2011).
The good news is that renewable energy will be the fastest-growing energy source over the same period.
Fossil fuels will continue to dominate as carbon emissions will rise by 34 percent, renewable energy consumption will rise 2.8 percent per year and total energy use of the renewable share will increase from 10 percent in 2008 to 15 percent in 2035. This will still leave fossil fuel at 78 percent of the world’s energy use in 2035. The IEO2011 does however not incorporate prospective legislation or policies that should affect energy markets.
China alone will account for 68 percent more energy than the U.S. by 2035, energy-related carbon dioxide emissions rising from 30.2 billion metric tons in 2008 to 43.2 billion metric tons in 2035, and a global increase of 43 percent. Renewables will supply 15% of the world’s energy in 2035.
The demand for natural gas is set to increase in demand, by 52 percent, with hydraulic fracking experiencing the highest increase. The IEO2011 projects the world’s energy use to increase from 505 quadrillion British thermal units (Btu) in 2008 to 619 quadrillion Btu in 2020 and 770 quadrillion Btu in 2035.
World oil prices will remain at a high and according to EIA light sweet crude will reach $125 per barrel, in real 2009 dollars, in 2035. Petroleum and other liquids fuel will increase by 26.9 million barrels per day between 2008 and 2035 and conventional crude oil production is less than half this amount at 11.5 million barrels per day, while production of natural gas plant liquids increase by 5.1 million barrels per day.
According to the IEO2011, “Comparisons of expected energy use in developed and developing nations reveal stark differences in growth over the next 25 years. Energy use in countries outside the Organization for Economic Cooperation and Development (OECD) will increase by 85%, while in OECD economies the growth will be 18%.”