Green funds are attracting investors

Until recently, green investment funds were mostly a niche for individual investors. But investing with the idea of improving the environmental actions of corporations, not just maximizing profit, is starting to catch 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.

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 such as Harvard and Yale, and even the U.N. 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.

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.

"This can be the most important voice that they have -- the money talks," said Frederic Hauge, chief of the Bellona Foundation, the largest nongovernmental environment organization in Norway.

Hauge and others say investment funds can be directed to companies producing energy and engaging in other carbon-intensive activities in the most sustainable way possible.

In Britain, the environment agency's pension managers last year shifted contracts worth hundreds of millions of dollars away from U.S. fund companies like Capital International and State Street Global Advisors because they did not pursue what the agency considered adequate environmental standards.

The California teachers' fund, known as CALSTERS, with a $169 billion portfolio, has declared climate change its signature issue and has pushed companies such as Exxon Mobil and Southern, a giant utility, to fully disclose their climate-changing emissions.

Advocates of sustainable investing say they are disappointed that many organizations professing support for environmental goals have done so little.

"You'd think the first movers would be the universities and the foundations, but there's been little movement there," said Paul Hawken, a former owner of the Smith & Hawken garden retail chain and founder of the Natural Capital Institute, which tracks sustainable investing in the United States. "You see solar panels on the libraries, but you don't see them in the portfolio."