Can you make money and save the planet - Carlson School of ...

;
;
“ A paper
company might
be considered
dirty, but when
a paper company
starts harvesting
forests in a
sustainable way,
when it reduces
the toxicity of its
chemicals, that
has a huge effect.”
22 University of Minnesota
can paint themselves as more environmentally friendly than they are—a phenomenon called
“greenwashing.”
Finding a better way to do green investing was the impetus behind a Carlson School
field study program on the topic. Begun in 2000 with backing from Terry Stepanek,
’73 MBA, a Minneapolis-based venture capitalist (who has since passed away), the
project looked for ways to screen companies for their environmental impact in a more
complex way, one that emphasized breakthrough products and processes and which
also considered financial performance as a key factor in the investment decision.
Advisors to the project included Riverbridge; U of M alum Terry Foecke, managing
partner of Materials Productivity, a St. Paul-based waste reduction consulting firm; and
Alfred Marcus, a Carlson School strategic management professor and the Edson Spencer
Endowed Chair in Strategy and Technical Leadership. The students looked for companies
that first offered good financial performance; they also looked for so-called “ecoefficiency
enablers” or “industry transformers”—firms that could change the standards of an entire
industry. “The cleanest company in a dirty industry has a great positive impact on the
environment,” says Dana Feick, ’86 BSB, a research analyst at Riverbridge, who adds that
since the field study, Riverbridge has developed its own Eco Leaders Portfolio of green
stocks. “We don’t limit ourselves to companies that make the tree-hugger grade. A paper
company might be considered dirty, but when a paper company starts harvesting forests in
a sustainable way, when it reduces the toxicity of its chemicals, that has a huge effect.”
The Eco Leaders Portfolio includes about 45 stocks in industries such as information
technology, health care, industrials, and materials technology. Feick and Thompson also
look for companies that are not in traditionally green areas. For instance, while Eco
Leaders has some alternative energy stocks, it also includes Mobile Mini Inc., a Tempe,
Ariz., company that uses recycled shipping containers to build its portable storage
containers, and Atlanta-based CheckFree Inc., which provides electronic financial
services to corporate clients. Feick also likes Landec Corp., a Menlo Park, Calif., firm that
developed a breathable membrane for produce packages so convenience stores and other
low-volume vendors could sell bananas. The Eco Leaders portfolio, which gets two-thirds
of its assets from institutional investors and one-third from individual investors or trust,
has had “a fantastic year,” says Feick, and was up nearly 18 percent through August.
The investor’s dilemma
As more consumers turn to green investing, there is concern that
some sectors may become overvalued. In recent months, alternative
energy has been frequently compared to dot-com firms. Biofuels, says
Feick, may eventually be profitable, but not every technology currently
being promoted is sustainable. The bottom line: Investors should think
twice before pursuing too narrow a definition of green. “It’s not that they
are wrong to invest in those companies, but they are limiting themselves,” he notes.
Winton agrees. Investors who want to green up their portfolio might be better off
picking a moderately green fund, rather than individual stocks. Don’t write off entire
industries, either. “I’d like to see firms rewarded for good behavior,” he says, “rather than
writing off all firms in an industry and thus giving up any hope of influencing them.”
Ultimately, green investments may not be the best way to make money or save the
planet. A higher gas tax, says Maitland, would do a lot more to reduce carbon dioxide
emissions than ethanol investments. “Frankly, I think technological progress is the best
thing for the greening of America,” he notes, adding that new technologies tend to be
cleaner than the ones they replace—newer cars pollute less than clunkers. “Perhaps the
best thing I could do as an investor would be to put my money into technology.”
Mary Lahr Schier is a Northfield, Minn.-based freelance writer.