Green Companies Can Produce Competitive Returns
Green investing doesn’t have to mean weaker performance. Quite to the contrary, sustainable corporate practices can signal stronger long-term prospects.
So writes Sara Silver in “When Quants Take on Climate Change,” winner of the 2016 Women’s Economic Round Table (WERT) Business Prize. The prize, which AIER announced today, is awarded to the top-judged essay written by a current or past recipient of Columbia University’s Knight-Bagehot Fellowship in Economics and Business Journalism.
Financial engineers, Silver adds, have designed low-carbon funds that can now match the risk and return of the S&P 500 and other indexes. The new funds, she says, are “overturning the long-held belief that sustainable investing comes at a cost.” They are backed by data and a decade of corporate disclosures that show that companies with better environmental, social, or governance records earn higher long-term profits.
The funds’ emergence make it possible for passive investors to get into green investing. Among the asset managers selling the new more profitable green funds, Silver says, are BlackRock, Goldman Sachs, State Street Global Advisors, and UBS. Among the institutional purchasers are The New York State Common Retirement Fund and the Rockefeller Brothers Fund.
The development of the new green funds arises out of the growing capacity to analyze mass amounts of data. The improved metrics and analytic tools are enabling such investing to move into the mainstream. But the story has been under-reported by the business press, Silver adds.
A veteran of The Wall Street Journal, the Financial Times, and The Associated Press, Silver also reports on a new trend: Credit rating agencies and index designers are beginning to factor environmental, social impact and governance records into their work. Among other things, this will make it possible for investors to make choices based on both these factors, as well as traditional financials.
Silver will receive her $2,000 WERT Prize tonight in New York City at a Knight-Bagehot Alumni event that will include a panel entitled, “The Market Solutions to Climate Change.” To read the full text of Silver’s winning essay click here.
The Knight-Bagehot Fellows visit AIER’s campus in Great Barrington, Massachusetts each spring at the end of their year-long studies at Columbia. For two days, the mid-career journalists attend seminars and mingle informally with Institute researchers. This year’s class will be on campus May 12-14.
AIER’s partnership with the 40-year-old Knight-Bagehot program began in 2008. The Institute has published the winners of the WERT prize since the award was established in 2014. Earlier winners are David Lieberman of Deadline.com and Mark Garrison of Marketplace. To read all the winning WERT essays, visit www.aier.org.
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