Sunday, May 22, 2011
USCCB Socially Responsible Investment Guidelines - Part 6: Protecting the Environment
This is one of my favourite categories. I moved to Canada from Hong Kong when I was 8 years old in 1987. Just shortly after I had arrived, Toronto started the curb side recycling program. Initially, it was only a small "blue box" program where you had about 3 cubic feet of space to place your recyclables each week. The idea that your garbage was really not garbage was really revolutionary. There was also a big push in education in the schools. Over the years, the recycling program had really expanded. Currently, in Toronto, there are now 3 types of boxes for recycling. The blue box still exists, but is now a big wheel barrel. Items such as aluminum cans, glass, and Tetrapaks go here. There is also a grey box which take paper products. Similarly, it is a big wheel barrel. Most recently, a green bin program was started. Compostable material such as food scraps go here. These items are all picked up weekly by the curb. The goal of the city is to divert 70% of garbage from landfills. A large majority of Canadian cities run similar programs and I would say they have been largely successful.
The same cannot be said for our friends in the US. I work with many customers from the US and from the anecdotal evidence I have gathered, curb side recycling is still an exception rather than the norm. I'm not here trying to trash my American friends, but the point I want to make is that the protection of the environment cannot be achieved, at least efficiently, unless there is governmental and corporate support. This is where our investment comes into play. We should be using our investment as our voice.
The USCCB's policy for their own investment is to actively promote and support shareholder resolutions that encourage corporations to act responsibly. Just recently, I had exercised my shareholder right and obligation and voted, by proxy, on the various matters to be discussed at the annual shareholders meetings. However, what I found was that most of the questions on which I voted were very broad. They usually revolved around executive pay, use of certain accounting firms, and other shareholder resolutions. Therefore, I have concluded that it would be difficult as an individual investor to voice peripheral concerns such as the protection of the environment, unless the company's business was directly linked to it.
How to Invest to Protect the Environment
As a result, our obligation is really to select companies that are already environmentally conscious, or better yet, have products or promote technologies that protect the environment. We should also avoid in investing in companies that harm the environment, whether through their manufacturing processes and business practices or by the use of their products.
I will use my own portfolio as an example. First and most obvious is my investment in First Solar (Ticker: FSLR). It makes solar panels which produce electrical energy with no byproducts. The only impact to the environment would be the manufacturing process and also the panels' disposal at the end of life. One solar panel produces in the vicinity of 4000 kWh in its lifetime, which is equivalent to 14400 MJ, or 413 L worth of gasoline. I hardly think one would need to burn a fifth of 413 L of gasoline to produce 1 solar panel! Solar energy, is without a doubt, green energy. First Solar is not without some problems. It uses cadmium telluride in its panels. Elemental cadmium and cadmium telluride in its own form are toxic to humans. It is important that First Solar is able to recycle these panels at the end of their lives.
The second and less obvious green investment I have is Google (Ticker: GOOG). To many people's surprise, Google is actually a very green company. It invests heavily in solar and wind energy, for example. It also uses goats to "mow" their lawn, instead of traditional lawn mowers. There are many good things that Google is doing with regards to helping the environment.
On the flip side, we want to avoid investing in companies that do the environment harm in one way or another. One obvious example is oil companies like Exxon Mobil (Ticker: XOM) and British Petroleum (Ticker: BP). BP has become the poster child for companies to hate, with its recent oil spill in the Gulf of Mexico. Aside from oil spills, the burning of fossil fuels derived from crude oil releases huge amounts of carbon dioxide and other pollutants. Fossil fuels, in and of themselves, are not evil, but in today's world, humans rely so heavily on them that there may be irreparable damage done to the environment if we continue to consume them at the current rate. Our insatiable thirst for crude oil is simply not sustainable. We should direct our investment elsewhere.
It is really not that difficult to evaluate whether a company is environmentally friendly or not. Just look at its products and how it is made and used. If you find that it's not that easy to evaluate, try multiplying its current volumes by 10 or 100. That may make things more obvious. Or, you can try googling the company name with "environment" and see what results come up. The internet is really a great place to do research in this area. In the end, using common sense is likely all you need to do.