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December 12, 2008
Book Review: Sustainable Investing: The Art of Long Term Performance
    by Anne Moore Odell

Editors Cary Krosinsky and Nick Robins new book compiles eighteen new essays that argue sustainable investing is the key to positive long-term performance and the health of the planet.


This holiday season, investors are going to bed with of visions of stock tickers dancing in their heads, not sugarplums. People are nervously recalculating their retirement savings as they watch the constant gyrations of individual stocks and indexes.

However, individual wealth, global financial institutions, corporations—both public and private—and even the health of the planet are not riding on the short-term ebb and flow of stock markets. They depend on long-term investments and long-term value creation. According to many of the essays collected in "Sustainable Investing: The Art of Long Term Performance" published by Earthscan, the clearest lens for looking at long-term investment is sustainable investing that systematically integrates environmental, social and economic factors.

Krosinsky and Robins have collected essays by some of the brightest minds of the sustainable investing movement, including Julie Fox Gorte, Valery Lucas-Leclin, and Stephen Viederman. As many of the authors write, investors are using the tools of sustainable investing for more than moral assuagement—investors have embraced sustainable investing because it is delivering positive returns.

Sustainable investing isn't a new phenomenon, but it could be the newest and best answer to the current troubled economy as investors question long held beliefs about how capital should be invested. There is already US$5 trillion invested in sustainable investing funds. This amount increases exponentially if one also considers the corporate and government bonds—US$120 trillion in 2006 alone—that incorporate elements of sustainability.

Research from Krosinsky points out that sustainable funds outperformed mainstream indices between December 2002 and December 2007, with sustainably invested funds showing 18.7% return on average compared to S&P return of 13.2%, and MSCI World's return of 17% during the same time period.

Sustainable investment's ability to outperform traditional indices and funds is likely to continue. Robins says, "whether they are huge pension funds or individual savers, investors are looking for strategies that offer long-term security– and sustainable investing provides the answer. As the world seeks to stimulate an economic recovery, sustainable investing in clean technologies, microfinance and social enterprise offer proven routes to generating wealth and resolving pressing problems such as climate change and global poverty."

The book divides "Sustainable Investing" into four sections which cover a broad range of subjects, including: the rise of sustainable investing; the new risks and opportunities created by the current market, such as climate change and clean energy; sustainability across asset classes other than stocks and bonds; and lastly, what the future could hold for sustainable investors.

The last section of the book, which looks to the future and to developing trends in sustainable long-term investing, includes an essay focusing on China by Ray Chueng and another essay on India by Dan Siddy, forecasting the role sustainable investing should play to shape the next century.

One outstanding essay found in the last section of the book is Tessa Tennet's "The Global Agenda" which contains a wish list for "One Planet Investing." The essay details how sustainable investing can respond to the challenges of the next twenty years and lays out why sustainable investing is the only way that a modern capital market can survive. Tennet's seven-point wish list includes the need for the development of metrics and benchmarks for sustainable investments, the need for federal governments to create policies that protect long-term development and the protection of natural resources, and for the United Nations to step up their involvement with SRI strategies.

In the conclusion, the editors write "the next five years are likely to be among the most tumultuous to date for sustainable investment." Yet within this tumult rises great opportunity to slow down climate change, develop new clean energies, and new capital markets that are "finally ‘fit for purpose' for the social, economic and environmental realities of the 21st century."

The book ends with a new world where to invest is to invest sustainably: "we started this book as credit crunched, and we end it as long-standing financial institutions disappear, having failed either to link reward with responsibility or to appreciate and properly manage systemic risk. The scale of the investment transformation ahead demands a new paradigm, The challenge for sustainable investing is not to become like today's mainstream but, rather, to replace it."

 

 
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