Green Investing

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“The marketplace reacted to the election and pushed renewable energy stocks down,” says Matt Patsky, co-manager of the Winslow Green Growth Fund. “I think they’re pretty good investments now, so we’re starting to add some of them back into the portfolio.”

So why now? It’s a basic tenet of investing: Buy low and sell high. If you’re optimistic about a company’s long-term potential, a stock price that’s temporarily pushed down is an opportunity to pick up shares at a reduced price.

That outlook points to one of the tough decisions that every investor faces: It’s one thing to have high regard for a company; it’s quite another to have the patience and risk tolerance to stick with that company even when other indicators suggest the money is better invested elsewhere. But keep in mind that investments appearing to be off the beaten path, visionary or just plain risky can deliver a bigger payback to investors who get in on the ground floor.

“I have clients who I put into natural food companies years ago, before they went mainstream, and they’ve done very well with that,” says Hal Brill, president of Natural Investment Services. “We identified Whole Foods when it was $10 a share. It’s $90 now.”

Another example of the way that SRI can pay off is when doing good also means doing well. “A company with stronger environmental management could be less likely to be exposed to environmental liabilities,” says Carsten Henningsen, chairman of Portfolio 21.

Doing The Homework

Research can be challenging, both for individual investors and for the fund managers. Suppose that a fund is considering investing in XYZ Toys. If the screening criteria include labor practices, one obvious question is whether the toys are made by people who are paid a fair wage and who work in a factory under safe conditions.

But getting clear answers to such questions isn’t always easy. For example, if XYZ Toys is based in one country, but the toys are made in another, the geographical distance can limit management’s view of the day-to-day operations. Considering the trend toward offshore manufacturing, this situation is more the rule than the exception. If the factory is owned or operated by a subcontractor, management’s view gets even cloudier. And if that subcontractor buys parts from another company, XYZ Toys may not know a thing about the conditions that played a part — however small — in the toys that it sells.

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