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Another factor that should
be promoted to encourage more voluntary initiatives is the increasing interest
in Socially Responsible Investment (SRI). This is the fastest growing
theme in finance, there are over a trillion dollars in SRI funds in the USA and
Europe. Many funds are looking for companies with good PRO-ACTIVE enviro
programs. But many - probably most - companies are unaware that improving
their enviro performance can attract investors. It is important to educate
companies about this, especially public ones which of course includes lots of
small to medium manufacturers on the nasdaq and penny stock indexes. to
attract the investors you need a competent enviro and social report, perhaps
following the Global Reporting Initiative guidelines. Many fund and
investment managers now recognize that good enviro performance is a sign of
higher quality management.
Some
evidence
Dow Jones has a Sustainability Index that identifies top companies and they license the index to investment funds Vanguard Group,
the largest index fund company, has a social index fund using the Calvert Groups
index
there are over
150 funds I know of
Academic research
shows that companies with better enviro performance that is recognized by
investment managers have a stock price 1-3% higher than their competitors
without that reputation. That can be worth a hell of a lot! Also
research shows that enviro responsbile firms have lower betas or volatility in
their stock prices so that is also interesting to investors.
Also, better
enviro performance reduces risk, and bankers are starting to recognize
this. Some banks offer better credit terms because of it, which is also
worth a lot of money.
I recently gave a
prestnation on this to a group of big mining companies, arguing that the reason
they should be focused on P2 and sustainability management is to increase their
market value by attracting SRI, and by reducing their cost of capital, as well
as the basic efficiency benefits. They were very interested, none of them
had thought about this approach, and all are asking for more informatoin and
training.
Lead with the
money, folks. But it is not saving money that is particularly interesting,
it is higher market value and lower cost of capital.
Burt
Hamner
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