How green are green bonds?

corp-bondSome $34 billion in bonds labeled as green have been sold so far in 2014, three times as much as last year. Some experts predicting that as much as $100 billion of green bonds will be sold in 2015. These bonds — issued by governments, companies and international financial institutions like the World Bank — will help to finance solar and wind energy, hybrid cars, efficient buildings, cleaner waterways.

This sounds like unalloyed good news–and it may be. It’s just hard to know.

Today, the YaleEnvironment360 website posted my story about green bonds, headlined with a question: Can Green Bonds Bankroll A Clean Energy Revolution? Again, the answer is maybe. That unsatisfying, perhaps, but that’s the way it is.

That’s because, for the moment, a green bond is any bond that an issuer decides to label as green. Big banks and NGOs are working to set stricter standards, but they will take a while to arrive. So, for example, corn ethanol, nuclear power and methane capture while fracking could all be deemed green.

The bigger question, though, is whether green bonds are financing projects that, without them, would not get done. Again, that’s hard to say. But if all we are getting with green bonds are labels on bonds that would have been issued anyway, we’re wasting our time.

That said, there’s potential here–at heart, the potential to attract new money to finance low-carbon infrastructure. So the boom is green bonds is worth watching.

Here’s how my story begins:

Looked at from one angle, climate change is an infrastructure problem. To limit global warming to 2 degrees C and avoid the worst effects of climate change, about $44 trillion will need to be invested in low-carbon projects like wind farms, solar panels, nuclear power, carbon capture, and smart buildings by 2050, the International Energy Agency estimates. That’s more than $1 trillion a year — roughly a four-fold jump from current investment levels.

Where’s the money going to come from? Maybe from green bonds, say bankers and environmentalists alike. Green bonds, which are also known as climate bonds, are fixed-income investments that are designed to finance environmentally friendly projects. Pioneered by international development banks — the European Investment Bank issued the first climate bond in 2007, followed a year later by the World Bank — they are today issued by state and local governments (Massachusetts, Hawaii, New York, and the cities of Stockholm and Spokane, Washington, among others) and by big companies (Bank of America, Unilever, and the French utility GDF Suez).

Uses of the bond proceeds are varied. The World Bank sold green bonds to raise funds for geothermal energy in Indonesia and free compact fluorescent bulbs for the poor in Mexico. Massachusetts raised money to clean up a superfund site. Energy company EDF’s green bond financedwind farms in France, and Toyota used the proceeds from a green bond to make loans to American consumers who buy hybrid cars.

The story goes on to explain why “green bonds may not be all they’re cracked up to be.” You can read the rest here.

How to read a sustainability report

voices_gunther2It’s no exaggeration to say that a new corporate sustainability report is published nearly every day of the year. After all, most of the Fortune 500 now generate reports, many of which read like paeans to exemplary business behavior. If companies behaved as well as they are portrayed in these reports, the world would be a much, much better place.

Still, CSR or sustainability reports can be a useful starting point for looking at a company and its impact. In my latest story for the environmental website Ensia, I offer a guide to reading these reports. Here’s how it begins:

Corporate sustainability reports have been around since … well, it’s hard to say.  The first report may have been published by “companies in the chemical industry with serious image problems” in the 1980s, or by Ben & Jerry’s in 1989 or Shell in 1997. No matter — since then, more than 10,000 companies have published more than 50,000 reports, according to CorporateRegister.com, which maintains a searchable database of reports.

But who really reads them? As a reporter who covers business and sustainability, I do. Maybe you do, too — as an employee, investor, researcher or activist.

Here, then, are five tips to help you make sense of the next report that lands on your desk or arrives via email.

You’ll have to read the Ensia story to learn more but the key word to remember is context. The best corporate reports put their data in context, by comparing it with prior years or previous goals or industry peers or even the needs of the earth. Few reports meet this standard, alas.

Thanks to Steve Lydenberg and Bill Baue for their help with this story.

Illustration courtesy of Ensia

Are your investments tied to genocide?

SP1119147That’s a refugee camp in Sudan. If you are an investor in mutual funds, it’s possible–perhaps even likely–that you own a small share of one of a number of foreign oil companies that are doing business with the government of Sudan, and thereby helping to finance a genocidal, outlaw government that is directly and indirectly responsible for the deaths of millions of people, and the displacement of many more.

I’m returning to the subject of “genocide-free” investing with a column this week at Guardian Sustainable Business, about the puzzling and troubling refusal of a mutual fund managed by ING US to even consider divesting in holdings in foreign oil companies that do business in Sudan. US oil companies are prohibited by law from operating there, but US-based mutual funds are free to invest in Chinese, Indian and Malaysian oil companies that help finance the Sudanese authorities.

Despite the best efforts of an advocacy group called Investors Against Genocide, big US mutual fund companies including Fidelity, Vanguard, JP Morgan Chase and Franklin Templeton continue to invest those foreign oil companies. It’s not because they are unaware of the issue. I’ve covered the topic of “genocide-free” investing since 2007, beginning with a story for Fortune.com headlined Fidelity’s Sudan Problem, and followed a few months later by another called Warren Buffett and Darfur. By then, Harvard, Yale and Stanford had divested their holdings in PetroChina and Sinopec, demonstrating that divestment is both possible and practical. In 2009, as an investor in mutual funds managed by Fidelity and Vanguard, I voted for divestment (and blogged about it here).

A few mutual fund companies–notably T. Rowe Price and TIAA-CREF–have agreed to purge their holdings of the Asian oil companies, but most have resisted. Among the most egregious is ING US, whose own shareholders voted for divestment. If nothing else, this is a reminder that we’re a long way from achieving “shareholder democracy” in corporate America.

Here’s how my story for Guardian Sustainable Business begins:

Call me old school but, in my view, companies should be accountable to their owners.

They should also try to stay away from repressive governments like the one in Sudan, where millions of people have been killed in a long-running genocide.

So when, as part of a campaign to stop the flow of money to Sudan, investors voted to ask a mutual fund managed by ING US to sell its holdings in companies that “contribute to genocide or crimes against humanity,” you’d think that ING US would comply.

It has not.

You can read the rest here.

To put this in perspective: It has been more than 15 years since the U.S. imposed sanctions on Sudan, and nine years since the killings in Darfur were declared to be a genocide by the U.S. Congress. Yet financial institutions are still investing in the worst companies funding the genocide.

It’s another reason, not that we need one, why so much of Wall Street is rightly held in such low esteem by so many Americans.

RSF Social Finance: Making money, making change

Happy customers of Revolution Foods

Happy customers of Revolution Foods

If you have a few extra dollars in savings, and you’d like to earn more than 0.00001% interest or whatever it is your bank or money market fund is paying, and you’d like to support socially-conscious businesses, you’ll want to take a look at RSF Social Finance.

RSF Social Finance is a financial services organization of modest means (about $145 million in assets under management) that is bursting with big ideas and bold rhetoric. It calls itself “a leader in building the next economy.” It seeks to generate “social and spiritual renewal through investing, lending and giving,” Its mission is to “transform the way the world works with money.”

Whew. What’s going on here?

To find out, I visited RSF Social Finance’s offices in the Presidio complex in San Francisco last week to talk with Don Shaffer, the organization’s president and CEO.

At the simplest level, RSF looks and acts very much like a bank: Its flagship product, the Social Investment Fund, takes deposits and makes loans to so-called social enterprises, a term that’s widely (and often carelessly) thrown around to describe businesses or nonprofits whose intention is to improve society and the environment.

Deciding what qualifies as a social enterprise is subjective, at best. That said, the RSF Social Investment Fund supports companies and nonprofits that, by all appearances, do great work. Among them: [click to continue…]

Deep green investing: a closer look

A divestment rally at Harvard

A divestment rally at Harvard

As you’ve no doubt heard, Bill McKibben and his allies at 350.org have launched a  a national campaign to persuade colleges, universities, churches, foundations and, yes, people like you and me, to stop investing in the fossil fuel industry. The campaign raises interesting questions as, I’m sure, McKibben hoped it would. Among them:

Does divestment make sense as a strategy to curb climate change?

If those of us who are concerned about climate change want to align out investments with our beliefs, what options are available?

In a column called Deep Green Investing published last week by Ensia, a lively new online magazine about environmental solutions, I argued that, by itself, divestment will probably not accomplish much. Having said that, the campaign could prove useful as one of a number of tactics being deployed by 350.org, the Sierra Club and others that are aimed at bringing about political change–namely, taxes or caps on global warming pollutants, EPA rules to curb coal-burning, etc.

In The Nation, Mark Hertsgaard argues that these grass-roots climate efforts have already produced results–350.org galvanized opposition to the Keystone Pipeline, which may have persuaded President Obama to delay a decision after the election, and the Sierra Club’s Beyond Coal campaign has, along with cheap natural gas, helped drive the decline of coal in the US. Hertsgaard writes:

As important as the victories themselves was how they were won. Both the Sierra Club and 350.org eschewed the inside-the-Beltway focus and top-down political strategy of big mainstream environmental groups, as exemplified by the cap-and-trade campaign. Instead, they emphasized grassroots organizing at the local level on behalf of far-reaching demands that ordinary people could grasp and support. Their immediate goal was to block a specific pipeline or power plant, but their strategic goal was to build a popular movement and accrue political power.

This is the political context in which the divestment movement makes sense. It won’t shake up the oil industry–the Ensia story explains why–but it’s a useful organizing tool.

But what might the campaign mean for investors? Today, I’m taking a closer look at a couple of “deep green” broadly-diversified mutual funds that have decided, unlike most other funds that market themselves as green or socially responsible,” to cleanse their portfolios of companies that extract fossil fuels. [click to continue…]

In Israel, clean tech is not the new new thing

David Ben-Gurion, a clean tech pioneer

David Ben-Gurion, clean tech pioneer

Sounding more like a clean tech venture capitalist than a head of state, David Ben Gurion, the first prime minister of Israel, once said that Israel requires “the study of desalination, massive utilization of solar energy, preventing waste of useful rainwater and maximization of power from wind turbines.”

Ben Gurion, who was born in 1886, said this in 1955. This was a man ahead of his time.

Since then, an Israeli company called Netafim pioneered the idea of drip irrigation in agriculture to save water, another called Luz built the first solar thermal power plants, still another called IDE Technologies became a global leader in desalination and Chromagen developed solar thermal water heaters that can be found on most rooftops in Israel, and elsewhere.

Today, Israel, which has been dubbed Startup Nation, remains a seedbed of clean tech innovation–last year it ranked second in the world (behind Denmark) in a report called Coming Clean: The Cleantech Global Innovation Index 2012 [PDF, download] by CleanTech Group and WWF.  I visited Israel last week, and had a chance to talk with a founder of Israel Cleantech Ventures, the chairman of a company called Miya Water and executives at electric-car company Better Place. I’ll report this week on my findings.

First, some context. As Ben-Gurion saw more than half a century ago, Israel is short on natural resources–water, land, oil–and thus needs to use what it has efficiently. This is the biggest, but not the only, explanation for the growth of Israeli clean tech. Most everyone serves in the military, exposing them to advanced technology. Ariella Grinberg, a young associate with Israel Cleantech Ventures, told me she did her service in the Israeli equivalent of the US’s super-secret NSA (National Security Agency), overseeing a multimillion dollar budget and sophisticated software, when she was just 19. The country also benefits from its world-class colleges and universities, among the Israel Institute of Technology, aka the Technion, the nation’s oldest university. (Here’s a fun example of what their students can do.) A strong entrepreneurial spirit pervades the culture, which may also have its roots in universal military service. “People come out of the army, they’re tired of taking orders, they want to be their own boss,” one executive told me. Finally, targeted government support for basic research has helped underwrite the sector. [click to continue…]

Should “green” funds invest in fossil fuels?

Bill McKibben’s groundbreaking Rolling Stone story (Global Warming’s Terrifying New Math) and 350.org’s “Do the Math” divestment campaign raise important and difficult questions about fossil fuels. One that is starting to roil the world of socially-responsibly investing is this: How should mutual funds that strive to be “green” or “sustainable” or “socially responsible” deal with the fossil fuel companies in their portfolios? Should they divest, as McKibben argues?

That was the topic of a column I wrote last week for the Guardian Sustainable Business, which generated some noteworthy responses. It’s part of the British newspaper The Guardian, which has one of the most popular English language media websites in the world. Here’s how the column begins:

“We’re going after the fossil fuel industry,” Bill McKibben tells about 1,800 cheering fans in a Washington, DC, theatre. “They’re trying to wreck the future, so we’re going after some of their money.”

Al Gore notwithstanding, McKibben – an author, academic and founder of the grassroots climate group 350.org – is America’s leading environmental activist. His 21-city Do The Math tour begins a campaign to persuade colleges, churches, foundations and governments to divest their holdings in coal, oil and natural gas companies.

“It does not make sense,” McKibben tells the Washington audience, “to invest my retirement money in a company whose business plan means that there won’t be an earth to retire on.”

He’s right about that, but the divestment campaign raises a thorny question: where can investors who worry about climate change put their money?

Divest for our Future, 350.org’s divestment website, recommends “environmentally and socially responsible funds“. The trouble is, the biggest and best-known mutual funds that call themselves environmentally and socially responsible also invest in fossil fuel companies. They evidently haven’t heard McKibben’s message.

Is this green?

The column–you can read the rest here–goes on to report that the Parnassus Equity Income Fund  holds about 14% of its assets in oil, natural gas companies and electric utilities that burn fossil fuels, that the TIAA-CREF Social Choice Equity Fund owns shares in dozens of oil and gas firms including Hess, Marathon and Sunoco, and a pair of shale gas giants, Devon Energy and Range Resources, that the Calvert Equity Portfolio  has about 10% of its portfolio in fossil fuels, including  Suncor, which says on its website that it was “the first company to develop the oil sands, creating an industry that is now a key contributor to Canada’s prosperity,” and that the Domini Social Equity Fund has, among its top 10 holdings, Apache Corp, an oil and gas exploration and production company.

Are you surprised to learn that these funds invest in oil and gas companies, including those in the Canadian Tar Sands? Perhaps naively, I was. [click to continue…]

Chevron. Sustainable. Really?

It’s not every day that one of the world’s biggest corporations files an ethics complaint against a little-known government official–in fact, if it’s happened before, I missed it–but that’s exactly what Chevron did last week in the state of New York.

The company accused Thomas DiNapoli, the state comptroller, who oversees the state’s pension fund, of accepting about $60,000 in campaign contributions from lawyers and supporters of people who are suing Chevron in Ecuador. The campaign donations, it is alleged, influenced DiNapoli to use his power as the trustee of  the pension fund, which owns Chevron stock, to push Chevron to settle the long-running, bitterly-fought lawsuit.

Imagine. Politicians being influenced by campaign donations.

Chevron would know about that. Last month, the company donated $2.5 million to the Congressional Leadership Fund, a super PAC that supported House Republican candidates. The donation “appears to be the largest contribution from a publicly traded corporation to a political group” since the Supreme Court’s Citizen United ruling, The Washington Post reported. Chevron also spent nearly $15 million on Washington lobbying since the start of 2011, the Post said.

So…evidently, it’s fine for Chevron to lavish money on politicians but unethical for its opponents to do so.

As it happens, Chevron’s complaint against DiNapoli was not even the most surprising news about the company to surface last week. Even more unexpected was the announcement that Chevron was being added to the holdings of the NASDAQ OMX CRD Global Sustainability Index, a “benchmark for stocks of companies that are taking a leadership role in sustainability performance reporting.”

The NASDAQ CRD Index helps guide investors seeking companies that are more sustainable.  Just a few months ago, at the Rio + 20 confab, NASDAQ  and several other stock exchanges promised, along with the UN Global Compact, to “promote long-term, sustainable investment in their markets.”

But what does that mean when an index includes Chevron, America’s second-biggest oil company? [click to continue…]

Commerce and conservation in Africa

A conservation lodge in Namibia

Much of Africa, you may be surprised to learn, is growing faster than the US. The economies of Kenya, Ghana, Botswana, Rwanda and Tanzania all grew by at least 4% last year. (US GDP growth was 1.7 percent.) But while modernization is lifting millions of Africans out of poverty, unchecked growth — of farms, ranches, mining and infrastructure — threatens Africa’s unsurpassed wildlife and wild places.

Can commerce and conservation coexist in Africa? A nonprofit called the African Wildlife Foundation (AWF) has set out to prove that they can do better than co-exist: It is going into business for itself to demonstrate that thriving commercial enterprises, if run right, can help protect wildlife and their habitat.

Last year–its 50th anniversary year–the foundation created an  investment company called African Wildlife Capital to raise money from investors in the US to support conservation-friendly businesses in Africa. African Wildlife Capital has raised about $3 million, all of it through its own board, and so far it has invested in three projects–an avocado farm in Tanzania, a livestock operation in Kenya and a tourism lodge in Namibia. [click to continue…]

Stephen Viederman: Foundations don’t practice what they preach

Today’s guest post comes from Stephen Viederman, the former president of the Jessie Smith Noyes Foundation and an expert on sustainable investing. Steve, who has worked in the foundation world for more than 25 years, defines sustainable investing is “future-oriented, risk-adjusted and opportunity-directed.”  This is also called socially-responsible or green investing.

Here’s the problem: Even foundations that aim to promote sustainability or social justice with their grants don’t see their investments as another tool to achieve that end. They don’t, in other words, put their money where their mouth is, or where their values are. Steve, by the way, is also the father of Dan Viederman, executive director of Verite, a human-rights nonprofit; evidently, working for the public good runs in the family. This essay was originally published by Inflection Point Capital Management, a new sustainability-driven asset management boutique led by the estimable Matthew Kiernan with offices in Toronto, London, New York and Melbourne.

Philanthropic foundations are like old-fashioned slot machines. They have one arm and are known for their occasional payout.

Although the term “mission-related investing” found its way into the lexicon of philanthropy decades ago, the finance committees of most foundations continue to manage their endowments like investment bankers. Their portfolios give no hint that they are institutions whose purpose is the public benefit. There is a chasm between mission – grantmaking – and investment. The logic of a synergy between the two has yet to take hold. [click to continue…]