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July 27, 2012
PRI Publishes Case Studies of Sustainable Investment
    by Robert Kropp

A report provides examples of sustainable investments by CalPERS and other signatories to the Principles for Responsible Investment, and argues for government policies to help mitigate the risks of such investments.

When Cary Krosinsky, Senior Vice President of Trucost and editor of Evolutions in Sustainable Investing: Strategies, Funds and Thought Leadership, spoke with following the book's publication in January, he said, "There's still misunderstanding about what sustainable investing is, and to what degree that misunderstanding is in the way of mainstream application."

Part of the problem, he writes in his introduction to the book, lies with sustainable investors themselves.

Addressing the negative screening practices of traditional SRI—the "unsophisticated screens" which, he pointed out, still account for 90% of the trillions of dollars invested in "a socially responsible manner" in the US—Krosinsky wrote, "Take a purely values-based approach, and you risk missing the very same practical opportunities in eco-efficiency and innovation, where the sustainability we require will come from."

"But at the end of the day, I don't think it matters," Krosinsky told, using as an example the decreasing cost of solar. "These things will happen, so I hope there's enough recognition that there's a way forward that could be positive."

In a recently published series of case studies, the United Nation's Principles for Responsible Investment (PRI) offers examples of sustainable investments made by several of its more than 1,000 signatories. In most cases, allocations to cleantech, microfinance, and sustainable agriculture and forestry are small when compared to the total assets under management of the investors; but, the report points out, the investors "have found that the risks associated with these investments may not be as high as they were initially perceived to be and that investments can generate healthy financial returns."

One of the report's case studies addresses the experience in sustainable investing of the California Public Employees' Retirement System (CalPERS), whose $230 billion in assets under management makes it the largest pension fund in the US. CalPERS has invested $1.2 billion in its Alternative Investment Management (AIM) program, the focus of which includes companies in the alternative energy sector, especially biofuels and solar.

In 2010, CalPERS allocated $500 million to an internally-managed environmental index fund, which, the report states, "invests in approximately 380 securities around the world that derive a material portion of their revenues from environmentally friendly sectors such as low-carbon energy production, energy efficiency management and carbon-trading."

"Most of those interviewed for this publication were clear that government policies which help to mitigate investment risk are key to making the allocations," the report observed. But while many barriers and difficulties persist, attractive investment opportunities already exist. Some investors and policymakers are seeking to overcome the barriers and realize financial returns while contributing to what Krosinsky described as inevitable: the transition to a low-carbon global economy.


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