Sunday, December 5, 2010

Socially responsible, sustainable and hopefully profitable investing

Historically, socially responsible investing (SRI) has been associated with a strategy of avoiding companies involved in “vices” such as guns, gambling, alcohol and tobacco. A more modern view also focuses on ethics (perhaps avoiding firms that negatively affect the global economy) and sustainability (protecting the environment and managing the planet’s limited natural resources). As a result, today’s more expanded view includes investment opportunities in areas such as water treatment, energy conservation, agricultural production and pollution management.

MY TAKE: The broad array of SRI and sustainable investment opportunities include innovative emerging companies and industries (such as alternative energy) as well as the transformation of traditional industries (such as transportation and oil production). As investors, we must understand the risks. As with most investing activities, the SRI and sustainable themes do not guarantee profits. Issues to consider include 1) the negative impact of the credit and financial crises on project funding, 2) regulatory confusion, 3) the potential for pricing pressure and commoditization and 4) weak business models. I look forward to discussing this important topic with you in more detail as we move into the New Year.

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