ROI of Green Investments, Part 1

Green investors often refer to the “triple bottom line”:

  • What are the social benefits?
  • What are the environmental benefits?
  • What is the financial Return on Investment (ROI)?

The first Socially Responsible Investment (SRI) funds avoided companies that made cigarettes, supplied the military, or did business in South Africa. This new approach was called “negative screening”. Later on, SRI investment companies started including environmental screens.

The next logical step beyond negative screens is to assess the proactive “good” being accomplished by the company in which one is investing. What result is the company being responsible for?

Some green investors suggest selecting companies that will “make a lot of money” against the backdrop of climate change or other major issues. While this is a first step, something more is needed. I propose a new approach called the “Ecology Benefit Index”.

What makes an investment ecological? The starting point is to focus on ecosystems. To me, the biosphere as a holistic living unit, comprised of subsystems like air, water, land, and energy. For each subsystem, I want to know:

  1. What are the indicators of health for that system?
  2. What are the specific challenges facing that system?
  3. And what are the clear and measurable goals that we would want to attain to assure the health of that system?

Science has advanced to the point where today, an investment can be rated according to such an “Ecology Benefit Index”. This index can then be used to help investors select companies that can most directly and effectively help protect, restore, and enhance the vitality of people and the biosphere.

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  1. Christopher Keys

    Ecology Benefit Index would be a valuable idea if you could get the market to adopt a set of standards so that investments could be compared apples to apples.

    What kind of strategy did you have in mind to arrive at a collective agreement on how to measure indicators?

  2. Erik

    The financial crisis has really publicized some of the worst practices on Wall Street, many of which socially conscious investors have worked to remedy over the years. It’s good to see the global financial crisis take center stage during the SRI in the Rockies’ responsible investment industry conference with the belief that a more socially responsible approach to investing canβ€”and shouldβ€”play a role in helping to transform the investing world. Here is their link for those interested in learning more on this event: http://www.SRIintheRockies.com

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