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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“This is not driven by altruism.” -Paul Morris, Vice President of Sustainable Planning and Development, Cherokee

In a workshop at last week’s Ceres conference, Mr. Morris explained the benefits of Transit-Oriented Development (TOD). His private equity firm redevelops brownfields – dormant industrial properties usually marked by significant environmental damage – into new, mixed-use developments.

I was intrigued by the political and economic calculus behind such projects. Mr. Morris described how homebuyers, commercial tenants, and local governments are driving TOD growth – and not because of any sense of social mission. Buyers and renters want proximity to work and transit, and cities want the revenues from more intensive land use.

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Last week’s Ceres conference included a panel on water scarcity and risk. The term “peak water” was mentioned, framing water as a commodity facing a peak in availability (like oil) and a potentially tradable value, similar to carbon.

Panelists identified water scarcity as a human rights and community issue as much as an environmental issue. Chris Williams of the World Wildlife Fund reported that over 1 billion people globally have no access to safe drinking water.

Meanwhile, water demand and consumption has increased in the private sector for manufacturing, energy production, and agriculture. A significant amount of the water consumed is wasted through agricultural runoff, leaks, and weak or nonexistent conservation and efficiency programs.

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During March 3-7, 2008, I had the opportunity to attend the 2008 Washington International Renewable Energy Conference (WIREC), touted to be the largest international conference on renewable energy in the world. WIREC was actually three events rolled into one—a ministerial conference for policy makers, a business conference, and a tradeshow. Most everyone involved in renewable energy was there.

From the size and the diversity of the corporate landscape represented at the panels and on the tradeshow floor, it was obvious that companies in every industry want to be considered committed players in the renewable energy space.

BP, among the largest oil companies in the world, paid $1 million to be the lead sponsor of this three-day event. Other non-traditional green companies, including oil major Chevron, waste-to-energy power company Covanta Energy, and auto maker GM, were also principal sponsors.

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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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Prior to its merger with Chevron in 2001, Texaco was involved in controversial legal proceedings related to its activities in Ecuador between 1969 and 1990. In May 2003, attorneys representing 30,000 indigenous Ecuadorians filed suit against Chevron seeking to collect $1 billion in damages for oil pollution in Ecuadorian forests and rivers 30 years before. The case went to trial in an Ecuadorian court in October 2003, and was pending as of March 2006.

Attorneys for Ecuadorian indigenous peoples appealed a May 2001 decision by a federal judge in New York to dismiss attempts to sue Texaco in U.S. courts. The U.S. courts determined that Ecuador was the appropriate jurisdiction. In August 2002, a U.S. federal appeals court upheld the May 2001 dismissal. Nevertheless, the appeals court ruling allowed that a verdict against the company reached in an Ecuadorian court would be enforced in the U.S. Legal action was originally brought in November 1993 by representatives of Ecuadorian indigenous communities and settlers from eastern Ecuador. The plaintiffs included 100 residents of Ecuador and nearby Peru.

The suit alleged that between 1969 and 1990 the company was responsible for practicing extensive deforestation, depriving local communities of land, contaminating rivers with oil spills and production waste, and polluting the atmosphere by burning off gas. In October 1998, a federal appeals court reinstated the suit against Texaco in a New York federal court after it had been dismissed a first time.

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