There is a general consensus that the world is entering an era of ever increasing oil and energy prices, experiencing an inevitable yet unsustainable growth in population coupled with the potential shortage of water and food. All these issues exist with the constant threat of climate change. Thus sustainable investment is becoming a necessity, however many investors still do not take these issues into consideration, even through research indicates that companies who practice sustainable policies and operations considerably outperform those who don’t.
Sustainable Investment Research
Evidence from various reputable sources have proved that ‘green companies’ who actively manage their environmental impact and make associations with other green organizations, fare better on the stock market, meaning that shareholders and the environment can benefit if sustainable investment becomes a norm. One such study is the Newsweek Green Rankings, which published a list of the top 500 sustainable companies in America and the globe respectively. In an analysis of the 2009 results, companies that ranked in the top 100 fared better than the S&P 500; green rank companies were up by 15.3% collectively, whilst the S&P increased by 10.4%, making a sustainable investment rule a lucrative potential concept.
Model for Sustainable Investment: IBM
An isolated example of how sustainable investment offers environmental and financial benefits is the multinational company IBM, who was voted the greenest company in America by Newsweek. Over the last five years, IBM stocks have increased by over 100% where in comparison the S&P 500 has remained flat. These impressive figures can be attributed to IBM’s efforts to evolve with the times, from manufacturing hardware to producing and managing software and creating sustainable solution for energy usage. Financially large companies like IBM are also beginning to demand sustainable practices from suppliers, driving sustainable and responsible investment.
Future Potential of Sustainable Investment
In a separate analysis of the Newsweek Green Ranking by Tom Konrad, companies involved in traditionally high carbon emission industries such as food and energy production also outperform competitors. Green real estate and property development companies are also on the rise, for example green offices for rent are much in demand by environmentally responsibly companies, providing opportunity for sustainable property investment.
In making corporate operations cost and energy efficient, green ranking companies may change the strategies investors use to score companies, from more traditional financial criteria to corporate environmental management criteria. To a large extent the traditional method mimics the market, yet strategic sustainable investing has the potential to channel sustainable investment funds into forward looking and innovative companies from around the globe, from multinationals in the executive suites Charlotte offer to emerging businesses in developing countries.
Penny Munroe is an avid writer on environmental issues from around the globe.