Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: WEDNESDAY, April 11, 1990 TAG: 9004110468
SECTION: EDITORIAL PAGE: A-7 EDITION: METRO
SOURCE: Geoff Seamans Associate Editor
DATELINE: LENGTH: Medium
My reply, absolutely irrefutable, has been consistent: I'm not going to worry about it until we have some money to invest.
But in the abstract, it turns out, my wife was ahead of the curve, as they say these days. Mutual funds that stress environmentally sound companies, reports The Wall Street Journal, are booming.
A few such funds have been around for years. But "green" investing, says The Journal, really took off after the Exxon oil spill last year off the Alaska coast.
The boom may not endure, and I have no earthly idea whether such funds at the moment are overvalued, undervalued or properly priced. For me personally, it's all academic.
Yet in a typically American way, the development strikes me as a reflection of capitalism at its amoral best - even if that means (a) some of the "green" investments are in less-than-simon-pure companies and (b) profits still come first.
Not everyone is buying into the idea. Questions have been raised not only about whether sufficient care is taken by some funds in selecting environmentally sound companies for their portfolios, but also about whether such funds will perform well financially.
Rather than put money into such funds, one investment manager told The Journal, it makes more sense for investors to donate 10 percent of their investment gains to non-profit environmental organizations.
Moreover, not everyone agrees on what constitutes an environmentally sound company. In the highly competitive field of mutual-fund marketing, charges fly back and forth that the portfolio of Fund A or Fund B includes shares in enterprises with tainted environmental records.
A case in point, cited by The Journal, is Waste Management Inc., a big, nationwide landfill operator.
Purists argue that its stock shouldn't be included in an environmental fund, because the company has a long list of Environmental Protection Agency violations. But non-purists reply that the violations are the result of the company's size and the nature of the business; in fact, say the non-purists, Waste Management runs the cleanest landfills in the country and is working to make them cleaner.
I come down on the non-purists' side.
The trouble with the purists' argument is that virtually no waste-management company could meet their standards. Their answer is to avoid investing in industries where a degree of pollution is inevitable.
But that, it seems to me, does nothing toward solving environmental problems.
Like 'em or not, landfills are here to stay, because they perform a necessary function. (If recycling gets into high gear, it will reduce but hardly eliminate the need for landfills.)
Ditto for fossil fuels, refrigerators and a host of other industries to which environmental problems are linked. Isn't it wiser to encourage good operators to get better, and to develop alternative technologies that reduce or end pollution, than to avoid entire industries on principle?
Not for a minute do I believe that the marketplace, acting in a vacuum, would be sensitive to the environment, would reward non-polluters simply for being non-polluters.
For society as a whole, environmental degradation is an economic drag. But for individuals (including individual corporations) in society, it is cheaper - and thus more profitable, and thus of greater return to investors - not to clean up the messes you make.
Environmental issues provide an excellent illustration of the limitations on the roseate optimism of Adam Smith thinking. You can't see the invisible hand, but you can smell the garbage it throws onto someone else's property.
And because you can, the marketplace doesn't operate in a vacuum.
I wouldn't dismiss entirely the impact of do-gooders - of consumers who consciously avoid the products of companies with poor environmental records, of investors who consciously avoid buying stock in companies that aren't up to environmental snuff.
Far more important, though, is the impact of society's collective concern as expressed through government. The environment is "hot" politically; stricter clean-air and clean-water legislation is in the works; acid rain and global warming and toxic waste are household phrases.
If this political climate lingers, the profits will go to the companies that best learn how to live with environmental-protection constraints and to the investors who best identify those companies.
Maybe the political climate won't linger. But if it does, it'll give America a chance to do what it does best: Set certain limits in the public interest, then let private greed take it from there.
by CNB