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 SocialFunds.com 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
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 SocialFunds.com, 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.
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.