Green Options » Innovest

Energy Efficiency Is Good For Business

Jennifer Kaplan — Wed, 20 May 2009 19:13:15 +0000

Why bother improving energy efficiency? We know we should, but how do you articulate why? Of course, if there is an ROI case to be made then the analysis is easy. But really, it seems to beg a larger issue. Is there a reason beyond ROI?

Whatever the industry, managing costs is good for business, and increasing energy efficiency and reducing energy costs does just that. Given rising energy prices and a growing awareness of the importance of energy conservation, a carefully conceived energy management strategy may well be one of the most important steps a business can take to sustain and grow business.

Furthermore, research by Innovest Strategic Value Advisors suggests that companies with a clear energy management strategy have a competitive advantage. Companies that lead in energy management achieved superior stock and financial performance over “laggards.” They even achieved significant financial premiums in stock prices over competitors. This from the National Environmental Education Foundation:

Companies have been engaging in energy-efﬁciency strategies for years as a means to control costs. Increasingly, a body of evidence suggests that companies that take a systematic and strategic approach to energy management can enjoy a broad array of tangible and intangible beneﬁts of interest to investors. As ﬁnancial analysts and institutional investors come to understand this energy-value connection, energy management is becoming another measure by which they assess companies.

An Interview with Frank Dixon - Founder of Global Systems Change

Brenda Keener — Tue, 09 Dec 2008 23:56:21 +0000

Frank Dixon is the founder of Global Systems Change and the former Managing Director of Research for Innovest Strategic Value Advisors, which is the largest corporate sustainability research company in the world. His perspective on corporate thought and sustainability is that flaws in our economic and political systems make it impossible for any company to become sustainable. In fact, Mr. Dixon managed to shake my belief in many of the fundamental “sacred cows” I learned in business school!

Frank attributes his revised perspective to his tenure at Innovest. He found that companies tasked with the holy grail of sustainability usually were able to mitigate no more than 20% of their negative environmental impact before starting to suffer financially. Profits could initially be increased by going green, but then most corporations hit a wall. Why?

The Green Business Edge

Jessica Jane French — Sat, 27 Oct 2007 17:16:17 +0000

In nearly every post I describe the reasons business should go green. I tell you about social responsibility, about the fact that potential employees find sustainability attractive and the assurance that you may save some money in the long run. What if I told you that going green could give you a significant edge over other businesses in the same sector? Well, its true. Recently, the Carbon Beta Equity Performance Study came to the conclusion that there exists a "strong, positive, and growing correlation between industrial companies’ sustainability in general, and climate change in particular, and their competitiveness and financial performance." Basically, this means that companies who practice environmental sustainability have a competitive edge in their industry.

Innovest, an investment research firm, launched the study in order to better understand the effect of sustainability upon potential business investment. What they found was a much more substantial difference than most had predicted. In fact, the report found that, "In the longer term, the out-performance potential will become even greater as the capital markets become more fully sensitized to the financial and competitive consequences of environmental and climate change considerations”.

While this may be great news for some, it does not mean happy days for all. The report noted that the ’strong and postive’ correlation between a business’s performance and its sustainability was not necessarily true for every sector of business.

Further, the report found that potential investors are having difficulties figuring out which companies are truly sustainable. Because of inadequate reporting methods, investors have to do a substantial amount of leg work to figure out which companies have a comprehensive sustainability program in place, and this may be a deterrent in future investing. As the report notes, disclosure information is notoriously unreliable, inconsistently reported across companies and over time, and generally not validated by independent third parties… Emissions data alone provides less than 25 percent of the information a sophisticated investor requires."

The folks at Innovest think that the method of disclosure is a pretty big obstacle for investors looking for a truly green company. As founder Matthew Kieman puts it, "It is increasingly critical that performance-driven investors move beyond simply pressing for greater company disclosure," he said. "We are now seeing them begin to demand the sorts of investment tools, research and products they need to turn mere information into superior investment decisions and performance." Superior investment decisions, indeed! As business owners and conscious citizens, we really need to take measure that would ensure that investors looking to put money into a green company had the resources to make informed decisions. Not only will it be good for green minded investors, it will bonly serve to increase the green business edge.