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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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3 Comments Post a comment
  1. Katy Delay #

    First of all, I believe you have a link problem at “click here” to read Ms. Silver’s essay, seventh paragraph. When I click I find myself on a Time Warner page where there are ads for “hot foreign women.” Can that be correct?

    Secondly, I’m a climate skeptic to whom the article probably does not do justice, although I’d love to read it before commenting further. I base my skepticism on the work of a number of researchers whose work I believe to be credible, and my first impression of her article is that she seems to have made some assumptions (and perhaps, worse, so has AIER, the donor of the prize?) (1) that “climate change” is defined properly, (2) that it is a problem, (3) that it can be and has been measured correctly, (4) that humans are the cause of it and therefore should and can do something about it, and (5) that whatever they do try to do about it does not cause more harm than good.

    Once I can find and read the article, I will be very interested in learning more about her approach to the subject. Perhaps I am jumping the gun.

    Like

    February 3, 2016
    • Luke Delorme, Research Fellow #

      Climate change, the warming of the Earth, is happening. Scientists are able to assess hundreds of thousands of years of temperature data, and we are in a warming period. There have been warming and cooling periods in the past, but all scientific signs point to that change becoming more rapid. Climate models predicted that human activity would cause warming, and that is coming to fruition.

      However, let’s assess it from a probability framework. Let’s say your skepticism is appropriate and the likelihood that humans are truly causing climate change in only 25%. Certainly you agree that warmer temperatures lead to melting ice (or maybe you’re a skeptic of that science too). When ice melts, there will be more water and sea levels will rise. This is just one of the many changes that would be potentially catastrophic. Even if we assign a low probability of human activity causing climate change, isn’t it worth trying to make some changes?

      If you had a 25% chance of disease and you had a way that you thought you could reduce that likelihood even slightly, wouldn’t it be worthwhile?

      Nobody is ever going to convince you or any other climate denier that climate change is real and man-made, but I am adamant that AIER would be doing a disservice to the world to agree with you. I’m fine if we say nothing about climate change itself, since it’s really not a question of economics, but if we say something, I sure hope we don’t do a disservice to all future generations.

      Like

      February 4, 2016
  2. Aaron Nathans, Communications & Public Affairs Manager #

    We fixed the link, thank you for pointing that out, Katy. Here’s a link to the original essay: https://www.aier.org/2016-women%E2%80%99s-economic-round-table-prize-winning-essay-when-quants-take-climate-change

    Like

    February 5, 2016

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