Sustainable investing is hot, as evidenced by the number of books coming out on the topic.
In two of the latest, the authors maintain the recent financial meltdown and election of Barack Obama will only hasten investor interest in the area.
Investing in a Sustainable World: Why Green is the New Color of Money on Wall Street by Matthew J. Kiernan, and Sustainable Investing: The Art of Long-Term Performance edited by Cary Krosinsky and Nick Robins, are hitting bookshelves now.
Mr. Kiernan is the Toronto-based founder and chief executive officer of Innovest Strategic Value Advisors. Mr. Krosinsky is vice president for environmental research firm Trucost PLC, London, and Mr. Robins is head of London-based HSBCs Climate Change Centre of Excellence.
The financial crisis will only accelerate, rather than slow down progress in the area, Mr. Kiernan said in a telephone interview. Never in living memory has traditional Wall Street thinking been so intellectually humbled.
Investors need to consider more than financial statements when determining a companys potential future performance, including environmental and human capital factors, Mr. Kiernan argues in the book. He says an iceberg balance sheet approach is needed where investment risk and drivers that are largely ignored by traditional financial analysis are examined.
With traditional analysis, youre really only seeing the tip of the iceberg, he said.
In the book, Mr. Kiernan also examines why institutional investors have been reluctant to embrace financial analysis based on environmental and social factors. He said a common view among North American institutional investors has been that embracing sustainable investing approaches could result in fiduciary duty neglect, because those approaches dont make money. Poor performance is a misconception, he argues, and cites examples of sustainable companies that have superior long-term performance.
In our view at least, the weight of evidence argues heavily in favor of the sustainable investment thesis, not against it, Mr. Kiernan writes. At the very least, it should convincingly call into question the blithe dismissal of the thesis by its many critics, as well as their breezy assurances about the existence of a robust body of evidence that supports their case.