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  Business Times 6 Jul 07
Going green is now mainstream

CONCERN over the environment has been going around the world for decades, but not until the last couple of years has there been such hand-wringing.

That perhaps should not be surprising. Climate change - a buzzword among governments, businesses and, more recently, even investment professionals - is palpable as never before.

Everyone now knows that the devastation that could be wreaked by inaction and indiscriminate energy guzzling is staggering. Estimates have put weather-related catastrophe losses at about US$17 billion a year over the past decade, up from US$1 billion a year in the 1970s.

The massive Stern report forecast that damage from climate change, if allowed to continue unabated, could be equivalent to up to 20 per cent of consumption a year.

The long-term forecast of a global rise in temperature is dire: the displacement of billions of people, severe drought and water shortage, among other things.

Environmentalists have always been at loggerheads with big business in the past, but a tipping point is now evident.

Businesses are waking up to the power of going green; this not only ensures a sustainable growth but also cements shareholder goodwill.

There have, so far, been a few high profile commitments. Citigroup, for example, has said it will commit US$50 billion to environmental projects over the next decade, while Bank of America pledged US$20 billion.

Now, investment managers, a key link in the corporate food chain, are also getting into the act.

The California Public Employees Retirement System's (Calpers) 'CleanTech' investments have trebled in value to US$600 million.

Al Gore, whose documentary has helped to further the groundswell, is launching a fund. A number of equity indices and at least one bond index have emerged to reflect the corporates that are taking a proactive role in addressing environmental and climate change issues.

Those names, it is hoped, may emerge as winners in a business climate upon which a slew of fresh regulations and restrictions on emissions may be imposed.

The capital commitment from large institutions like Calpers and private individuals with a philanthropic bent sends a strong signal that going green is now mainstream.

For many years, ethical investments have taken up a marginal proportion of portfolios at best, making steady albeit modest headway amid the impression that investors will have to sacrifice returns.

Now as environmental concerns snowball, it is reasonable to expect that the companies that are leaders in reducing emissions and in providing consumers with energy efficient products will prosper, and returns need not be inferior to those without ethical concerns.

In fact, they should, in time, prove superior.

For now, the investment universe is constrained by size, but that too will change.

But the most rewarding payoff by far is surely the virtuous cycle that could be created when investment dollars vote for green, making for general sustainablity in the long run.
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