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Why invest responsibly?

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It is a quarter of a century since the Brundtland report outlined the concept of sustainable development—development that meets the needs of the present without compromising the ability of future generations to meet their own needs—and forced it onto the political agenda. Mike Scott writes.

This piece originally featured in B&GT’s Guide to Sustainable Investment 2012

Twenty-twelve was also the 20th anniversary of the Earth Summit in Rio de Janeiro, which begat the Kyoto Protocol and laid the foundations for today’s carbon markets, renewable energy targets and emissions targets. In 2011, spending on clean energy passed the $1 trillion mark, according to Bloomberg New Energy Finance, and governments around the world—from Chile to China—have embraced measures to decarbonise their economies. We’ve come a long way in the last 25 years.

But at the same time, we are now living in a world of seven billion people and growing. Scientists say that our attempts to cut emissions of greenhouse gases and keep average temperature rises to 2°C have instead put us firmly on the track to rises of 3.5°C or more and we are running up against constraints to the availability of the most basic human requirements such as food, water and energy.

According to the Global Footprint Network, we are living far beyond our ecological means; it calculates that in 2011, we exhausted a year’s worth of our earth’s resources before the end of September and that after that point we were living on “ecological debt” in a way that is completely unsustainable. “That’s like spending your annual salary three months before the year is over, and eating into your savings year after year. Pretty soon, you run out of savings,” says Global Footprint Network President Dr. Mathis Wackernagel. “From soaring food prices to the crippling effects of climate change, our economies are now confronting the reality of years of spending beyond our means,” said Dr. Wackernagel.

These facts may seem to have little relevance to austerity Britain, but mankind is living beyond its ecological means just as we lived beyond our financial means in the run-up to the crisis—and we now have to pay for it.

According to former US vice-president Al Gore and David Blood, his co-founder of Generation Investment Management, in their recently-published Manifesto for Sustainable Capitalism: “Remarkably, even after enduring the global financial crisis – caused in significant part by short-term, unsustainable strategies and actions by both companies and investors – many of us are still content to embrace short-termism in nearly all aspects of our lives. As a result of this short-term perspective, we are […] driving our economies and our planet into liquidation.”

The think tank Chatham House adds in a new report that “even though many countries, including emerging economies, can point to impressive environmental improvement in the past two decades, the overriding global patterns of production, consumption and trade remain dangerously unsustainable”.

So, what has all this got to do with investors?

Well, there are a number of reasons investors need to consider environmental, social and governance (ESG) issues. Even five years ago, analysts dubbed these factors non-financial issues, but few people would now argue that they are not relevant to financial performance. It is clear that they can have a huge impact on the value of investments—consider the effect of failures over safety and the environment at BP and Japan’s Tokyo Electric Power Company (Tepco), which contributed to the Gulf of Mexico oil spill and the Fukushima nuclear disaster, respectively. At one point, BP shares halved in value compared to their pre-disaster levels and they still remain well below the price before the spill. Tepco looks unlikely to survive as an independent company after government moves to take a majority stake so it can reform the group.

The reason BP was drilling in the Gulf of Mexico and that Tepco built a nuclear power station on a fault line is that an age of cheap resources has come to an end. The consultants McKinsey point out that the economic growth of the 20th century was underpinned by cheap energy and raw materials, but in recent years prices have hit heights not seen since the 1900s and they are likely to remain both high and volatile for the foreseeable future.

It was not just cheap resources that fuelled the astonishing changes of the 20th century – it was cheap labour as well. When that labour stopped being cheap at home, businesses shipped their production to places such as China and India where they were lower. One reason wages were lower was because these countries had less well-developed rules on everything from child labour to workers’ rights to environmental health.

In today’s constantly connected world, consumers are better informed, more particular and more vocal than ever before, and organisations ranging from Vodafone to the London Olympics have found themselves in the spotlight over issues ranging from conflict minerals to labour rights in ways that can have a serious impact on their share prices. Not only that, but as public scrutiny grows and demand for labour increases, those cheap wages are rising and wiping out the cost advantages of outsourcing.

Meanwhile, the world has become increasingly complex. KPMG says that there are 10 “megaforces” that will significantly affect corporate growth globally over the next two decades. They are: climate change; energy and fuel; material resource scarcity; ecosystem decline; deforestation; water scarcity; food security; increased wealth and inequality; population growth; and urbanisation. But not only will each of these factors individually have a huge impact on businesses, they will also combine in unpredictable ways to create new problems.

It is a question of risk management. If the companies that you invest in are not aware of these issues or taking steps to deal with them, they will not be running their businesses in the right way to create value for you as a shareholder.

The flip side of this is that there are real opportunities out there for companies that seize the moment, as highlighted by the growing figure of $1 trillion that has been invested in clean energy.

“Despite the uncertain economic outlook, leading international companies across diverse sectors are investing heavily in sustainable products and services,” says Kirsty Jenkinson of the World Resources Institute. “Leading companies are demonstrating a growing belief that their future profit and growth will be tied to how effectively they respond to looming global challenges including resource scarcity, population growth, and climate change.”

The companies that are doing this are not all obscure start-ups run by nerdy lab technicians with a good idea—although there are plenty of those. Some of the world’s biggest and best-run companies are embracing ESG issues, too – the likes of Siemens, GE, Coca-Cola, Unilever, Ikea, Marks & Spencer and Procter & Gamble.

By all means, look to invest sustainably to do the right thing. But don’t forget that it’s a sound business decision, too.

Mike Scott is a freelance writer specialising in environment and business issues for the press and corporate clients. His work has been published in the Financial Times, The Times, the Guardian and the Daily Telegraph as well as in business publications ranging from Bloomberg New Energy Finance to Flight International.

Further reading:

The Guide to Sustainable Investment 2012

Mike Scott is a freelance writer specialising in environment and business issues for the press and corporate clients. His work has been published in the Financial Times, the Times, the Guardian and the Daily Telegraph as well as in business publications ranging from Bloomberg New Energy Finance to Forbes.

Economy

How Going Green Can Save A Company Money

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going green can save company money
Shutterstock Licensed Photot - By GOLFX

What is going green?

Going green means to live life in a way that is environmentally friendly for an entire population. It is the conservation of energy, water, and air. Going green means using products and resources that will not contaminate or pollute the air. It means being educated and well informed about the surroundings, and how to best protect them. It means recycling products that may not be biodegradable. Companies, as well as people, that adhere to going green can help to ensure a safer life for humanity.

The first step in going green

There are actually no step by step instructions for going green. The only requirement needed is making the decision to become environmentally conscious. It takes a caring attitude, and a willingness to make the change. It has been found that companies have improved their profit margins by going green. They have saved money on many of the frivolous things they they thought were a necessity. Besides saving money, companies are operating more efficiently than before going green. Companies have become aware of their ecological responsibility by pursuing the knowledge needed to make decisions that would change lifestyles and help sustain the earth’s natural resources for present and future generations.

Making needed changes within the company

After making the decision to go green, there are several things that can be changed in the workplace. A good place to start would be conserving energy used by electrical appliances. First, turning off the computer will save over the long run. Just letting it sleep still uses energy overnight. Turn off all other appliances like coffee maker, or anything that plugs in. Pull the socket from the outlet to stop unnecessary energy loss. Appliances continue to use electricity although they are switched off, and not unplugged. Get in the habit of turning off the lights whenever you leave a room. Change to fluorescent light bulbs, and lighting throughout the building. Have any leaks sealed on the premises to avoid the escape of heat or air.

Reducing the common paper waste

paper waste

Shutterstock Licensed Photo – By Yury Zap

Modern technologies and state of the art equipment, and tools have almost eliminated the use of paper in the office. Instead of sending out newsletters, brochures, written memos and reminders, you can now do all of these and more by technology while saving on the use of paper. Send out digital documents and emails to communicate with staff and other employees. By using this virtual bookkeeping technique, you will save a bundle on paper. When it is necessary to use paper for printing purposes or other services, choose the already recycled paper. It is smartly labeled and easy to find in any office supply store. It is called the Post Consumer Waste paper, or PCW paper. This will show that your company is dedicated to the preservation of natural resources. By using PCW paper, everyone helps to save the trees which provides and emits many important nutrients into the atmosphere.

Make money by spreading the word

Companies realize that consumers like to buy, or invest in whatever the latest trend may be. They also cater to companies that are doing great things for the quality of life of all people. People want to know that the companies that they cater to are doing their part for the environment and ecology. By going green, you can tell consumers of your experiences with helping them and communities be eco-friendly. This is a sound public relations technique to bring revenue to your brand. Boost the impact that your company makes on the environment. Go green, save and make money while essentially preserving what is normally taken for granted. The benefits of having a green company are enormous for consumers as well as the companies that engage in the process.

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Energy

5 Easy Things You Can Do to Make Your Home More Sustainable

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sustainable homes
Shutterstock Licensed Photot - By Diyana Dimitrova

Increasing your home’s energy efficiency is one of the smartest moves you can make as a homeowner. It will lower your bills, increase the resale value of your property, and help minimize our planet’s fast-approaching climate crisis. While major home retrofits can seem daunting, there are plenty of quick and cost-effective ways to start reducing your carbon footprint today. Here are five easy projects to make your home more sustainable.

1. Weather stripping

If you’re looking to make your home more energy efficient, an energy audit is a highly recommended first step. This will reveal where your home is lacking in regards to sustainability suggests the best plan of attack.

Some form of weather stripping is nearly always advised because it is so easy and inexpensive yet can yield such transformative results. The audit will provide information about air leaks which you can couple with your own knowledge of your home’s ventilation needs to develop a strategic plan.

Make sure you choose the appropriate type of weather stripping for each location in your home. Areas that receive a lot of wear and tear, like popular doorways, are best served by slightly more expensive vinyl or metal options. Immobile cracks or infrequently opened windows can be treated with inexpensive foams or caulking. Depending on the age and quality of your home, the resulting energy savings can be as much as 20 percent.

2. Programmable thermostats

Programmable thermostats

Shutterstock Licensed Photo – By Olivier Le Moal

Programmable thermostats have tremendous potential to save money and minimize unnecessary energy usage. About 45 percent of a home’s energy is earmarked for heating and cooling needs with a large fraction of that wasted on unoccupied spaces. Programmable thermostats can automatically lower the heat overnight or shut off the air conditioning when you go to work.

Every degree Fahrenheit you lower the thermostat equates to 1 percent less energy use, which amounts to considerable savings over the course of a year. When used correctly, programmable thermostats reduce heating and cooling bills by 10 to 30 percent. Of course, the same result can be achieved by manually adjusting your thermostats to coincide with your activities, just make sure you remember to do it!

3. Low-flow water hardware

With the current focus on carbon emissions and climate change, we typically equate environmental stability to lower energy use, but fresh water shortage is an equal threat. Installing low-flow hardware for toilets and showers, particularly in drought prone areas, is an inexpensive and easy way to cut water consumption by 50 percent and save as much as $145 per year.

Older toilets use up to 6 gallons of water per flush, the equivalent of an astounding 20.1 gallons per person each day. This makes them the biggest consumer of indoor water. New low-flow toilets are standardized at 1.6 gallons per flush and can save more than 20,000 gallons a year in a 4-member household.

Similarly, low-flow shower heads can decrease water consumption by 40 percent or more while also lowering water heating bills and reducing CO2 emissions. Unlike early versions, new low-flow models are equipped with excellent pressure technology so your shower will be no less satisfying.

4. Energy efficient light bulbs

An average household dedicates about 5 percent of its energy use to lighting, but this value is dropping thanks to new lighting technology. Incandescent bulbs are quickly becoming a thing of the past. These inefficient light sources give off 90 percent of their energy as heat which is not only impractical from a lighting standpoint, but also raises energy bills even further during hot weather.

New LED and compact fluorescent options are far more efficient and longer lasting. Though the upfront costs are higher, the long term environmental and financial benefits are well worth it. Energy efficient light bulbs use as much as 80 percent less energy than traditional incandescent and last 3 to 25 times longer producing savings of about $6 per year per bulb.

5. Installing solar panels

Adding solar panels may not be the easiest, or least expensive, sustainability upgrade for your home, but it will certainly have the greatest impact on both your energy bills and your environmental footprint. Installing solar panels can run about $15,000 – $20,000 upfront, though a number of government incentives are bringing these numbers down. Alternatively, panels can also be leased for a much lower initial investment.

Once operational, a solar system saves about $600 per year over the course of its 25 to 30-year lifespan, and this figure will grow as energy prices rise. Solar installations require little to no maintenance and increase the value of your home.

From an environmental standpoint, the average five-kilowatt residential system can reduce household CO2 emissions by 15,000 pounds every year. Using your solar system to power an electric vehicle is the ultimate sustainable solution serving to reduce total CO2 emissions by as much as 70%!

These days, being environmentally responsible is the hallmark of a good global citizen and it need not require major sacrifices in regards to your lifestyle or your wallet. In fact, increasing your home’s sustainability is apt to make your residence more livable and save you money in the long run. The five projects listed here are just a few of the easy ways to reduce both your environmental footprint and your energy bills. So, give one or more of them a try; with a small budget and a little know-how, there is no reason you can’t start today.

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