What One Sustainable Investor Looks for

Here are the main investment criteria used by Portfolio 21, a very good sustainable investment fund, in picking deals to put its money in:

Product/Service Impact: We look for companies that fully understand the ecological impact of their products and/or services and have taken steps to significantly reduce those impacts. We evaluate raw materials use, product packaging, transportation, product takeback and recycling programs, and the energy efficiency of products. We also consider the proportion of a company’s product range that is ecologically superior to its competition.

Investments: We favor companies that have demonstrated their commitment to sustainability through their investments. These may be capital investments in new plants or equipment or in the research and development of ecologically superior products or technologies. Favorable companies may also make merger, acquisition and divestiture decisions with an eye toward a future in which resource availability and quality of life will be significant considerations in determining the success of a business.

Leadership: It is essential that a company’s management understands the magnitude of the ecological crisis and views environmental sustainability as a major business opportunity. We expect corporate leaders to be advocates for environmental sustainability, and we seek companies that educate employees, customers, suppliers, and competitors about sustainable business practices. We also seek companies that lobby for progressive environmental legislation.

Environmental Management: Sustainability leaders have sound environmental management systems to help them identify and address environmental impacts and liabilities, develop action plans and procedures, and establish environmental accounting within the company. We expect companies to have identified those areas where its business activities (including products and services) have the greatest ecological impact, publicly report how these impacts are being addressed, and continuously improve performance over time.

Resource Efficiency: Resource efficiency and pollution prevention are good for both the environment and the company’s bottom line. We seek companies that recognize the value of resource efficiency, set goals and measure their progress. We expect improvements at both the plant and office level in the areas of building design, energy and material use, transportation, equipment upgrades, and production processes.

Liabilities: Global warming and climate change are among the greatest ecological risks we face, and the associated liabilities pose a threat to investors as well as the world. We evaluate companies with respect to liabilities such as greenhouse gas emissions, superfund sites, spills, toxic releases, and the fines and penalties associated with these liabilities.