It can grow well on trees

Moves are afoot to change the widely held perception that addressing environment and social challenges cannot make money, writes Rob Stock.

Carbon neutral living and business is talked about as a real aim for some but, as yet, carbon neutral investing remains the stuff of dreams.

When individuals go on to a site such as carbonzero.co.nz from Landcare Research, they are asked to plug in details of their power use, the amount of petrol they burn through, the number of rubbish bags they put out each year, and their air travel.

Based on those figures, their carbon footprint is calculated, and they are invited to hand over cash sufficient to regenerate bush which catches a similar amount of carbon to that which they emit in the course of daily living.

A person's investments are not included, though the ownership of a few hundred thousand dollars' worth of shares in polluting companies could have a very material impact, particularly if a person's portfolio is heavily exposed towards oil stocks, builders and manufacturers.

But could the day be approaching when it is possible to calculate your investment carbon footprint?

There are indications it might.

Carbon Neutral by 2020: How New Zealanders Can Tackle Climate Change arrived at booksellers with a fanfare this month. Tucked away among the chapters on composting, carbon neutral schooling, and energy efficient architecture, was a chapter by responsible investment expert Dr Rodger Spiller.

It posed the question whether investors could still aim to get a handsome return by investing responsibly, and that includes investing with a carbon conscience, although he admits there's still quite a lot of work to undo myths around responsible investing.

"One of the reasons why people do not invest responsibly is that they perceive incorrectly that they cannot make money and address environmental challenges, like achieving carbon neutrality, and social challenges, such as seeking solutions to poverty."

But he says: "The idea that you can have profit or principle, make money or make a difference, or that there needs to be a tradeoff between doing well and doing good, is a fallacy."

He's not alone in that belief.

In October, the United Nations' Environment Programme Finance Initiative, in conjunction with Mercer, released a report on responsible investing in which 10 of the 20 most robust academic studies on the subject identified a positive relationship between environmental, social and governance standards in companies and share price/managed fund performance in half of these. Seven more reported a neutral effect.

To date responsible investing has meant shareholder activism, a focus on a preference for investing in companies with positives like good labour relations, and low pollution records, as well as not investing in companies engaged in socially damaging industries like arms manufacture, and the production of tobacco and alcohol.

But there is mounting evidence that by investing responsibly, people can reduce their investing carbon footprint.

In July last year, British financial research company Trucost published a report on the carbon footprints of the UK's top 44 managed funds. It found seven of the 10 with the smallest carbon footprints were responsible investment funds.

That suggests one route to cutting the climate change impact of your investing is to use responsible funds, and although there's not a great deal of choice for Kiwis, the launch this week of a core international growth fund by giant fund manager AMP Capital Investors is encouraging.

KiwiSaver will see that choice, and the profile of responsible investment funds grow, Spiller says.

Not only will KiwiSaver introduce many New Zealanders to managed funds, but each year KiwiSaver schemes will have to report on their responsible investing policies, which should encourage each to think about supplying responsible investment funds, Spiller believes.

That Trucost's report can be compiled indicates how the measurement of carbon footprints, although not a precise science, is developing.

Perhaps the most important global carbon footprint-related project is one being backed by our own New Zealand Super Fund, which now has $14 billion of taxpayer money invested to help pay for future state pension provision.

The fund is one of the signatories to the Carbon Disclosure Project. Backed by some gigantic

- © Fairfax NZ News