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
The Scottish immigrant had two great causes. Most recognize his name today in the US and UK for his philanthropic investments in vehicles offering opportunities for human betterment: Carnegie libraries, university scholarships, Carnegie Hall, Carnegie Mellon University, teacher pensions (TIAA-CREF), etc.
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If a tree falls in a forest when no one’s around, does it make a sound? If a company emits carbon dioxide but saves a forest, has it achieved climate neutrality?
While both companies and outside stakeholders agree that reducing and/or offsetting emissions is a worthy corporate objective, there is no consensus on how to define and achieve this goal.
A new study from Clean Air-Cool Planet and the UK’s Forum for the Future considers climate neutrality and makes detailed recommendations for how to achieve it. Getting to Zero: Defining Corporate Climate Neutrality defines carbon neutrality as a condition in which “a company, or one of its products or services, can have no net impact on climate.”
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“You need to really scrub your investment portfolios, because I guarantee you — as my longtime good redneck friends in Tennessee say, I guarandamntee you — that if you really take a fine-tooth comb and go through your portfolios, many of you are going to find them chock-full of subprime carbon assets….
Similarly, the assumption that you can safely invest in assets that come from business models that assume carbon is free is an assumption that is about to go splat. You have lots of assets, many of you do, in your portfolios right now that truly do deserve that epithet ’subprime.’”
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Reflections from the meeting of the International Working Group (IWG) of the Social Investment Forum, meeting at the Santa Ana Pueblo, New Mexico, Nov 2-3, 2007.
“We are all indigenous peoples,” said Larson Bill, a leader of the Western Shoshone. “Some of us have preserved the knowledge longer.” He went on to say that “climate change” hit the first peoples of North America in 1492, with the results of destroyed environment and human lives, forced migrations, and cultural devastation.
Larson believes that some indigenous peoples have preserved enough of the knowledge so that there is still time to share it for the sake of all of us now experiencing climate change.
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Copyright © 2007 by KLD Research & Analytics, Inc. All rights reserved.
One of the under-reported heroes of the environmental cause is Patriarch Bartholomew I of the Eastern Orthodox Church. The story below reflects his efforts.
Before turning to the story, I’d like to quote some words of the Patriarch from his visit to the US ten years ago:
To commit a crime against the natural world is a sin. For humans to cause species to become extinct and to destroy the biological diversity of God’s creation, for humans to degrade the integrity of the Earth by causing changes in its climate, stripping the Earth of its natural forests, or destroying its wetlands … for humans to contaminate the Earth’s waters, its land, its air, and its life with poisonous substances — these are sins.1
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In the litany of failed technologies introduced by industry leaders, Sony’s Betamax—a videotape technology superior to its rival, VHS—probably leads the 20th century list.
Topping the 19th century list is Edison’s direct current (DC) electric transmission. At low levels, Westinghouse’s alternating current (AC) seemed a more efficient, safer means of transmitting power locally.
It may be that Edison had it right. DC allows transmission across greater distances with less power loss than AC. That may be crucial in bringing more wind and solar power on line. Suitable sites for wind and solar farms tend to be far away from the cities they’d supply. So says the July 26 Economist.
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Neutral is rarely considered an optimal condition, save for scuba buoyancy and, increasingly, with respect to carbon exposure. An eclectic roster of entities have announced aspirations to achieve carbon neutrality, including HSBC, Google, Super Bowl XLI, Silverjet and the 2008 presidential campaigns of John Edwards and Hilary Clinton.
As these initiatives have attracted positive recognition in the marketplace, more entities have caught on to the reputational benefits accruing from neutrality. This has, in turn, created a virtuous cycle or a “race to the top”. Or has it? A growing chorus of stakeholders has begun to question the net benefit of carbon offsets.
In an attempt to distill truth from fiction, F&C Investments has put out this excellent Guide to Carbon Offsetting. This four-pager is well worth the read for the carbon curious, committed and skeptical.
Traditional financial management curicula establish that a corporation’s primary objective is to maximize the value of the firm and, in turn, maximize shareholders’ return. Advocacy groups and the socially responsible investing (SRI) community have nothing against companies that strive to increase earnings — so long as profits aren’t maximized at the expense of local communities, employees, and the environment.
What’s been difficult, though, is making the link between environmental, social and governance (ESG) issues and financial performance. Over the years, dozens of studies have reported on how well corporate citizens perform from a financial standpoint.
My financial textbook, as well as some SRI skeptics, argues that companies that spend resources pursuing “extra-financial” objectives are at an inherent financial disadvantage to their competitors that instead devote those resources to seeking lower cost production, developing new products, and maximizing sales.
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While wind power has become the most economically competitive renewable energy source globally, future US growth faces a hurdle in the form of a supply chain bottleneck for turbines.
Market share for turbines has become increasingly consolidated in the hands of a few producers, putting pressure on domestic wind developers and creating an opportunity for more vertically integrated foreign utilities to acquire US assets. Throw in the fickle production tax credit for wind power with its two-year lifespan, and the US outlook for more wind power does indeed look shaky.
On the positive side, more and more states are increasing their renewable portfolio standards, the price of oil continues to rise, demand for energy is expected to grow and energy independence from foreign producers is still an attractive proposition to law makers.
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