Everyone’s talking about green these days…green this…green that. Suddenly green is the new cool thing when it seems like not long ago that it was barely surviving. But while everyone’s now aware of this phenomenon, it’s doubtful whether most people are cognizant of the financial drivers behind the movement. In the battle to save the planet, it might be business, long maligned as one of the primary forces hurting the eco-system, that ends up as the catalyst that ultimately preserves it.
Why?
Gideon Rosenblatt, the Executive Director of the Seattle based environmental action and networking organization, One/Northwest, described in 2004 what he viewed as the environmental movement’s primary failure; an inability to connect with, and engage its grass roots constituency for action rather than rhetoric. In a strategic position paper called “Movement as Network”, Rosenblatt, a former senior executive manager with Microsoft, stated;
The movement has done a good job of connecting with one-sixth of the public via “high engagement” membership and activism strategies. It must now also build a “low engagement” strategy to connect with the remaining 80% of the public who share environmental values.
Focusing on networking and communication technologies, Rosenblatt’s NPO concentrates on the connections that bind people and organizations in the Pacific Northwest’s environmental movement together, rather than the actual work those groups perform. In seeking to identify the problems he sees in the movement’s credibility with the general public, he argues for a reorganization of the basic activist model away from comprehensive, all-inclusive approaches, and towards more specialized attention, suggesting that environmental groups should be divided into three primary divisions of labor according to what they do best; people, solutions and resources.
With this increased specialization and collaboration comes his key to reaching the 80% of Americans that he says are in fundamental agreement with environmental causes but not involving themselves in the effort to do anything much about them. If Rosenblatt is looking for connections that bind people together in trying to save the environment, he needn’t wait any longer.
The recent launch of the Global Alternative Energy Fund by the Calvert Foundation, (an industry leader in the advancement of socially responsible investment (SRI) strategies and opportunities), released in conjunction with a new survey of American investor’s attitudes towards clean energy and green technologies as viable investment opportunities, has shed light on some astonishing trends. Sampling nearly 1100 investors nationally, both mainstream and socially responsible, Calvert discovered something that ought to make Rosenblatt delirious with glee. Once considered by the politically conservative business community as mostly the stuff of hippy lore left over from the 1960’s, democratic politics, and the domain of people with lots of time to worry about things other than economics, American shareholders…the people US businesses most listen to and accommodate…are now overwhelmingly seeing green when they think green. Environmentalism has joined the mainstream capital markets with those who bet on success with dollars. Observe these startling results on the opinions of today’s investors;
- 76% of all investors are concerned about the future impact of global warming on them and their families.
- 85% consider investment opportunities in alternative energy and clean power as a legitimate way to profit while helping the environment
On US investor interest in a global alternative energy mutual fund
- 71% say they’ll consider investing in a mutual fund with a focus on global alternative energy sources and technologies, including 58% of non SRI investors, and only 27% said they would not consider such a fund.
- Interest crossed political demographics, with 82% of democrats, 73% of independents and 59% of republicans expressing interest
- Women (77%) outnumber men (66%) for interest in an alternative energy mutual fund.
On types of US investors focused on climate change and alternative energy
- The gap between SRI (79%) and non SRI investors (68%) expressing concern over climate change and alternative energy sources has narrowed.
- Politics no longer define the interest; 92% of democrats, 76% of independents and a surprising 59% of Republicans now say they are concerned about climate change.
- Support was gauged “strong and consistent” with all groups expressing interest; SRI investors (87%), non SRI (81%), democrats (90%), independents (87%), and republicans (82%)
- Women (86%) outnumber men (66%) in interest on climate change
On US investors wanting more alternative energy investing choices
- 84% overall want more choices, including;
- 92% of young investors aged 25-34, and;
- 91% of democrats, 82% of independents, 79% of republicans
As powerful as these numbers are, they tell only part of the story. The truly significant findings lay not only with investor interest, but with unmet investor demand. Despite the surge of interest in climate change and alternative energy investments, only 16% of US investors now say they are actually investing in clean energy source technologies, and only one in five who rely on financial professionals for advice have had a conversation with their financial planner or advisor on investment opportunities. In other words, this market is ripe to explode.
US companies are aware of all this.
In a research study commissioned by the Social Investment Forum and just released this month by Mercer Investing Consulting in partnership with Calvert and several other industry stakeholders, the SRI sector of the defined contribution investment market was analyzed and the data revealed two startling revelations in the report titled, Defined Contribution Plans and Socially Responsible Investing in the United States.
First, at the present time 19% of US defined contributions plans already offer SRI funds in their portfolio options, and an additional 41% plan to introduce such options in the next three years, meaning that by 2010, 60% of the companies in America who offer 401k or other defined contribution plans to their employees will offer SRI funds as available investment options.
Second, 60% of those surveyed who did not have an SRI fund available in their defined contribution plan requested one. The mammoth $14 trillion defined contribution market constitutes 51% of all retirement funds under management in the US. Clearly this is an emerging growth market with opportunity for enormous potential for an infusion of expansion capital. With this kind of money flowing into the sector, Rosenblatt’s concern over finding a unifying bond with grass roots constituents is a virtual certainty in the coming years. People tend to be interested in what they put their money in.
This movement is not limited to individual investors. The institutional investment market is also exploding. The United Nations Global Compact recently released their report on the Principles for Responsible Investment, a survey of 200 investor giants holding over $9 trillion under management and concluded that ESG (environmental, social and governance) issues were creating “a sea change in global investing” in which 83% of investment managers had specialized staff dedicated specifically to SRI investment strategies, while 67% of asset owners and 83% of investment managers had adopted formal policies on SRI. Another 15% of owners and 5% of managers were planning to do so.
Clearly the move to social and environmental investment at both the individual and institutional level is significant, and it’s here to stay as more and more companies respond to the wishes of their investors. Remember the 80% of US citizens that Rosenblatt says are concerned about the environment but not actively engaged in helping create change? With the availability of socially and environmentally responsible investments filtering rapidly to the public, that number figures to change considerably in the coming years. As it does, an expanding market for Rosenblatt’s environmental activist model for organizational strategies comprising “people, solutions and resources” will also grow with it.
Beyond the groundswell in investor participation that is pushing corporate response to environmental concerns, a secondary impact is following close behind. Attracted to both the potential for profit in green technologies and the promise of environmental change through advocacy organizations, investment leaders like Calvert, Social Funds, Trillium Asset Management and Pax World Funds have lined up SRI funds for investors and helped to push the activist agenda as change agents, thus ensuring increased shareholder interest in driving corporate compliance with environmental objectives. Meanwhile venture fund organizations with smaller portfolios who are actively seeking partner companies to invest in, and not necessarily established opportunities with brand names.
The web-searchable RISE database (Research Initiative on Social Entrepreneurship) at Columbia University returns detailed information on 38 venture funds seeking investments in companies focused on environmental impact, and 32 looking for investments in renewable energy, some with as little as $2 million under management. These investors service the startup markets where small innovators have the opportunity to obtain seed funding or grow past early stage development. Forty green companies already receive institutional investment from this group alone. These companies and their venture partner investors are part of a small but growing trend as emerging financial support for eco-friendly and clean energy companies builds alongside other SRI investment solutions being looked at by a variety of financial service professionals.
The Internet will drive much of this demand as it continues to morph towards a more seamless communications capability with the merger of globally accessible information with the people and resources that make real time solutions tailored to highly specific interests not just possible, but routine. As activists for environmental change continue to seek influence with governments and corporations, their voices will increasingly no longer be heard as impediments to business, but as key stakeholders and shareholders instead. Investors, as they do in every other market, will drive the policies for companies large and small as they bank on green.
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Mark Lewis is the CEO and Executive Director of the Strategic Business Intelligence Group, a business networking and masterminding organization building a platform to leverage the power of social entrepreneurship in neglected and underserved economic communities in Dallas Texas. He can be reached at mark@strategicideas.org.