Greed in Green
Peter Katevatis - Jun 27, 2017
Investing is all about making your money grow. As Rod Tidwell (Cuba Gooding Jr) best yelled it: Show Me The Money!!! Corporations exist to grow revenues and make profits for their shareholders with limited liability. Public companies al
Investing is all about making your money grow. As Rod Tidwell (Cuba Gooding Jr) best yelled it:
Show Me The Money!!!
Corporations exist to grow revenues and make profits for their shareholders with limited liability. Public companies allow us all to participate in that growth by buying shares (partial ownership) in those entities. There has often been a misnomer that all capitalism leads to a barren wasteland of destruction but that simply is not true. We like to think of ourselves (investors) as a green society that brings socially responsible colour back to the corporate environment.
There is increasing research that shows profits can be higher for companies that are ethically responsible. Being green can be good for your bank account. There are three main parts of Socially Responsible Investing (SRI):
- Treat the planet well – minimize/eliminate pollution, recycle where possible
- Treat your employees well – pay fair wages with good working conditions
- Treat your shareholders & community well
Being mindful of the environment seems like anathema in the corporate world. However, since more investors care about corporations’ affects on air, land and water pollution this passes on to management and the corporate culture.
Keeping employees happy can boost productivity, minimize turnover, and foster a culture of growth. Enthusiastic workers can turn any company into a thriving success. Companies that maintain a fair level of corporate governance ensure that the company's owners (shareholders) needs are taken care of and ensures compensation packages and bonuses paid out are in an acceptable range.
These concepts may seem too left wing to be profitable; however, if a company can operate without pollution clean up expenses, create minimal employee turnover, and reward shareholders, their share price can trade at a premium. The average earnings multiple for a high SRI company rising higher than an average company. These companies operate with high safety standards which helps keep the corporate operation risks to a minimum.
I was surprised to see mining, oil and gas, and global conglomerates on the list of companies with low Environmental Social Governance (ESG) risk but it goes to show that almost any company can operate in an ethical manner. Investing definitely has a level of greed to satiate the desire of future cash needs. New data is starting to prove that being green can help create more of it.