1. What trends do you see in the field of “sustainable investing”? Where has the field come in the past five years and where do you see it going in the next five years?
The term “sustainable investing” is being used in many different ways. For investors, it has become very confusing to know what is “green” and what is “greenwashing.” The trend we are seeing is an increase in the number of companies racing to tell us how much they care, and what they are doing to improve our planet. Through detailed research, we distinguish the companies that are truly backing up their words with action from the companies that are greenwashing. This is one way we try to help investors navigate the confusion.
The first place to start is with a clear definition. For us, sustainability is simply “securing people’s quality of life within the means of nature.” This working definition acknowledges the limits of nature and society’s dependence on nature. It recognizes the fundamental challenge we face in meeting human needs without undermining nature’s ability to support our economy into the future. The primary issue is the limited biocapacity of the earth’s ability to provide the ecosystem services necessary to maintain the products and services we depend on.
The next step is applying this definition with specific evaluation criteria. Portfolio 21’s detailed evaluation criteria identify companies that truly recognize the enormous opportunity that exists to save money by saving natural resources and prosper by providing the products, services and technologies that are needed to create a sustainable society. These companies are developing cleaner and more efficient energy solutions, products designed to be reused and rebuilt, and processes that eliminate the need for toxic inputs while producing little or no waste.
The business and investment case for environmental sustainability has become increasingly clear and corporations that are embracing it are strategically positioned to prosper in the 21st Century.
2. There are clearly more sustainable investment options than ever before. Are there third-party verification processes that exist to help investors decide where to put their investment dollars?
The most helpful resource for investors is The Social Investment Forum, a national non-profit organization specializing in the field. Their website, www.socialinvest.org, has a lot of educational information including a directory of investment services.
3. How do sustainable investment funds perform compared to investment funds that don’t take into consideration social or environmental questions? Are there differences in short-term and long-term performance for these funds?
From our own experience, since Portfolio 21 started more than seven years ago, the fund has outperformed the markets as defined by the S&P 500 Index as well as the global MSCI World Equity Index. This competitive performance has certainly added to investor support for an investment approach based on the understanding that adaptation to changing global environmental investment risks is inevitable. The earlier this thinking is integrated into business practices, the more natural capital we will be able to retain for future generations, and the greater the economic stability we will be able to achieve. We believe companies that prove this understanding by innovating with environmental sustainability strategies have a real competitive advantage today and are poised for further leadership and innovation in the future.
4. What are the investment criteria and holdings of Portfolio 21? What makes it different from other sustainable investment options offered today?
Portfolio 21’s investment criteria seek companies that recognize environmental sustainability as a fundamental human challenge and a tremendous business opportunity. Our unique selection criteria allow us to identify and invest in companies that understand their ecological risks and opportunities and are taking positive action to integrate sustainability strategies in their business models. These companies see the real opportunities and future successes in understanding the ecological crisis and figuring out how to use environmental sustainability principles as core components of an intelligent business strategy.
Over 70 percent of the holdings are international and some of the most innovative holdings include: Swiss Re, East Japan Railway, Dell, Electrolux, Vestas Wind, Herman Miller, Whole Foods, and Interface.
There are six key components of our criteria:
Impact of Products/Services
The company understands the ecological impact of its products and/or services and has taken steps to significantly reduce those impacts. Priorities include:
Corporate behavior is driven by what is profitable and offers a competitive advantage for shareholders. Sustainable business strategies offer companies the ability to meet these objectives by designing ecologically superior products, using renewable energy, and developing efficient production methods.
6. Are there market or policy options that could encourage the growth of sustainable investment opportunities in the United States?
Sustainable investment strategies will continue to grow, by definition, because they will continue to offer the most competitive solutions. Countries with progressive environmental policies will offer the leadership and competitive edge for companies residing in those countries. The fact that Portfolio 21 invests less than 30 percent of its assets in the United States illustrates the leadership is coming from Europe and Japan and that the U.S. is lagging.