Vast Pools of Money Still Ignore Sustainable Investing

[xchrom]

http://www.bloomberg.com/news/2012-11-30/vast-pools-of-money-still-ignore-sustainable-investing.html

The short-term financial orientation of the investment community is one of the greatest barriers we face to creating a sustainable society.

The corporate community has made significant progress since 2000 in planning for the long term. Focus on environmental and social issues and corporate governance should give investors confidence and contribute to “external” benefits -- a stable society -- in the long run.

A common complaint among CEOs is that their shareholders, particularly the largest institutional investors, are indifferent to the banner issues of sustainability -- resource scarcity, human capital development and risk management, to name three. These issues rarely come up in quarterly analyst calls, and investors continue to focus on short-term financial performance. Without the support of their investors, who have the opportunity to earn substantial returns by thinking long-term, companies can only do so much.

In a previous article we noted the tremendous concentration of economic power in the world’s largest 1000 companies. In 2010 their aggregate revenues were $32 trillion. Their aggregate market cap of $28 trillion made up 49 percent of global market cap. Within this elite group a high level of concentration exists. Just 83 companies account for one-third of the group’s revenues; the top 172 accounts account for one half. Resource allocation decisions by the Global 1000, especially the largest ones, can have tremendous positive and negative impact on how millions of people live today, and how many more will live in the future.

[rablrouzer]

1. And here's why . . .

I'm in charge of a puddle within that vast pool.

At a private foundation, required by law to distribute at least 5% of its asset value every year.

Meaning: we have to earn 5% or distribute the endowment.

*Whether we should or not is an entirely separate discussion we've resolved in favor of being able to give into the future, not splurge now*

In today's investment climate it is all but impossible to earn 5% safely---and with certainty. In the good old days, all that was necessary was a passbook savings account paying 5.25% . . .

In my personal life, I drive a hybrid. I'm now replacing all my CFLs with LEDs (from China, of course). There's nothing I own that isn't super-insulated.

In my professional life, I've even insisted one charity we helped install ground source heat pumps. (Donated the extra cost, too). Then had the charity monitor a nearly identical building housing an identical program in a different nearby city.

Surprise! The ground source heat pumps cost substantially more to run than the standard gas furnaces / electric a/c. The reason? Gas heat here in OkieHoma is very inexpensive, while the electricity to keep the GSHP running in the winter isn't. True, the GSHP saved over the summer in A/C mode, but not enough to make up the difference.

Gas at site vs. coal fired electricity?

ANYWAY, "alternative energy" companies tend to be small, unless you count an investment in GE which is importing CFLs and LED bulbs as "alternative." Small companies go away. Investors are actually more likely to be "ripped-off" at small companies because they're not subject to the even inadequate SEC standards big companies abuse.

CONCLUDING:

1. "Alternative Energy" may not even save energy;
2. New "alternative tech" may not work. e.g., Solyandra's highly touted new form of solar collector
3. New companies (e.g., Solyandra) are more likely to be fraudulent rip-offs than older established ones
4. There is no certainty of return in new companies; adding "new tech" makes probable return even chancier.

That's why the US needs its government to keep subsidizing tech invention. And why the idea of helping fund a Solyndra is good, although let's add some adult supervision, please.