Until recently, green investment funds were mostly a niche for individual investors. But now investing with the idea of improving the environmental actions of corporations, not just maximizing profit, is catching on among some big pension funds and foundations, particularly in Europe and even in the United States.
These funds are redirecting investment toward companies that do the least environmental damage and those that try to limit their output of the emissions thought to contribute to global warming.
Among the leaders are the Norwegian Government Pension Fund-Global; ABP, the huge Dutch government pension fund; and the pension fund of the British Environment Agency. In the United States, the California State Teachers’ Retirement Fund, one of the largest pension funds in the United States, is one of the few American funds that has become a green investor.
“We decided that we should do this because our investment strategy was not linked to our mission,” said Howard Pearce, director of the pension fund for the British Environment Agency.
But most institutional investors, including a number of foundations already committed to environmental goals as part of their giving, have resisted the movement, or taken only small steps, out of fear that it will hurt earnings. These include the Bill and Melinda Gates Foundation, universities like Harvard and Yale, and even the United Nations pension fund.
“From the environmental perspective, the great nonplayer is the investor community,” said Matthew Kiernan, founder of Innovest, a global sustainable investing company. “The attitude is, ‘We don’t cut down any trees.’ But money is the oxygen for all the other sectors.”
Proponents of green investing say companies, foundations and governments can fight climate change through their investments even more effectively than through charities and other activities.
Some big investors are even going out of their way to divest themselves publicly of stakes in companies deemed environmentally lax. More commonly, however, they try to put pressure on management through private meetings and shareholder resolutions to modify their effect on the environment.