N.B.: The following Q&A is based on a recent exchange between an Australian business reporter and Peter Kinder, President of KLD Research & Analytics.

Socially responsible investors believe businesses must incorporate environmental, social and governance (ESG) factors into their management strategies.

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Sound investment is built on information, and socially responsible investment (SRI) requires accurate reporting of every aspect of corporate activity. A traditional balance sheet doesn’t reveal a company’s environmental, social and governance (ESG) risks and opportunities, which makes reporting on these “intangibles” critically important to the SRI community.

Since 2005, KLD has studied the S&P 100’s sustainability reporting practices for the Sustainable Investment Research Analyst Network (SIRAN), a working group of the Social Investment Forum (SIF). The 2008 Sustainability Report Comparison reveals encouraging news. Of the 100 largest U.S. publicly-traded companies, 86 maintain corporate sustainability websites and 49 produced sustainability reports in 2007. These numbers represent significant progress over the past three years.

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The Sustainable Business 20 (SB20) highlights “20 public companies that are leading the way to a sustainable society,” according to Progressive Investor, which has produced this list for the past seven years.

SB20 companies must excel by both sustainability and financial criteria, and they include both established companies and smaller innovators, like Accsys Technologies – an English firm developing sustainable substitutes for precious hardwoods. Larger players include IBM, which aims to cut data center energy use by half by 2010, while increasing computing capacity by a factor of 10.

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The July 14 Christian Science Monitor asks: “Should Ethical Investors Dip into Water Stocks?” The CSM’s Laurent Belsie discusses the potential for investment in water-related businesses with KLD Research Director Eric Fernald and Chris Brown of Pax World Investments.

Observers such as the Unitarian Universalist Service Committee argue that privatization of water supplies threatens the “right to water.” Fernald and Brown acknowledge that contracting out the management of public water supplies (i.e., water utilities) or selling the right to use public water supplies (i.e., bottled water firms) is fraught with ethical risks. However, in some circumstances private companies can manage or use public water supplies in a responsible manner. Both warn that ethical investors need to be vigilant if investing in companies that engage in this aspect of the water industry.

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After languishing for most of the 1990s, gold prices have risen steadily, enriching mine owners and some investors. The true cost of metals extraction and refining, however, is often borne by people and places far removed from the mercantile exchanges. Open-pit mines like Argentina’s Alumbrera disturb the landscape and pollute surrounding communities, which is tragic; now, in what could be a portent, it may also be a crime.

In June 2008, a provincial court in Tucumán, Argentina charged the vice president of mining company Bajo la Alumbrera with “crimes against the environment.” Three multinational corporations jointly own Bajo la Alumbrera: Xstrata, Yamana Gold and Goldcorp, a Canadian company. The Canadian Mining Journal reports that Julian Rooney, Vice President of Bajo La Alumbrera, was “not jailed, but his possessions were impounded.”

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July marks the third anniversary of the KLD Global Climate 100 Index (GC100)—the first global index focused on climate change solutions. The success of the GC100, which has outperformed its benchmark (the S&P/Citigroup BMI World) for all three years, is a testament to the strength of its mission and its methodology. (Click here for GC100 performance data.)

The GC100 serves as the basis for a number of investable products, including three mutual funds sponsored by Shinko Investment Trust Management in Japan; a mutual fund from Cominvest Asset Management in Germany; a unit investment trust sponsored by Advisors Asset Management; and several other separate and institutional accounts. Click here for a list of products based on KLD Indexes.

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Coal and the iron and steel works that consumed it were, 125 years ago, the foundations of Andrew Carnegie’s fortune.(1) So, his life would seem unlikely to hold lessons for investors concerned about global warming. But it does.

Carnegie’s Causes

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