Will Going Green be the Next Way We Go Bust?

Still, few people will go on a limb to predict whether or not being green is just a trend, a bubble likely to pop eventually, or a true sea change.

There is no consensus among economists, scientists and business leaders on what constitutes “sustainability” or what makes something “green.” There isn’t a uniform measuring stick. There are few standards investors can rely upon.

It’s just a matter of doing your analysis and reading a lot,” says Becker, the financial analyst.

Still, even with “corporate social capital,” Wertman says, businesses won’t automatically escape fire just because they have employed some green practices. Instead, they remain big targets. The improvements often just invite critics to further scrutinize the companies for other problems, or to call them out for hypocrisy (say, by using environmental initiatives to distract attention from controversial labor practices).

“When you put yourself out there, you are automatically asking radical activists in the world to start taking shots at you,” Wertman says. This makes widely agreed upon standards for green practices and technology important. If there were a uniform way to easily quantify how much impact a product or action has on the Earth, activists and investors alike would be able to easily gauge how environmentally responsible a business really is. Making those standards stringent and difficult to meet keeps all but the companies committed to spending the time and money to secure them from doing so. One prominent example of a universal standard is the multi-tiered Leadership in Energy and Environmental Design, or LEED, standards which, in a way, measure the “greenness” of a building.

If you get your building LEED certified its hard for anybody to say you’ve done anything wrong,” Wertman says. “That’s the way you protect yourself.”

Wertman isn’t the only one touting standardization. Alan Tratner, the green pitchman from Santa Barbara, also recognizes the dangers of greenwashing. That’s why attendees of a Clean Business Investment Summit he held March 26 at the University of California, Santa Barbara, discussed the critical importance of a green certification process. He pointed to standards besides LEED meant to measure environmental impacts, such as the U.S. Department of Energy’s EnergyStar label and the non-profit Green Seal program as early examples of such standardization efforts.

“Consumers want proof that it’s green,” he said.

Proof isn’t just important to consumers. Investors need it. They also need to know more than how much pollution a company emits. They need to study a company’s carbon footprint, not just in manufacturing, but in the operations at headquarters and at every stage of the production line. They also have to learn about tradeoffs, such as the impact a windfarm might have on its surrounding landscape or the impact a biofuel manufacturer might have an agricultural land. Meanwhile, they also have to understand how to gauge a company’s more traditional indicators, such as its management practices or financing. “Every investor has the experience of being wrong some times.”

Moroever, some technologies simply don’t pan out, and that’s yet another reason why Becker says investors need to diversify their holdings beyond any specific sector. In other words, it’s not wise to only invest in wind power producers, or any one technology.

“If you buy one or two companies in that area you take a lot of risk that the technology will become leap frogged,” he says.

“That’s true for any given business, not just clean energy or green businesses. Investing is risky. Still, Becker believes that while there are individually volatile stocks in clean energy, the industry as a whole has a lot of opportunity. Investors have to be cautious about putting all their eggs in one basket, and they also have to be just as cautious about greenwashing as consumers.

The Green Century Fund Becker manages uses a number of markers to measure the long term environmental impacts of the companies it follows. The fund is “fossil fuel free” and doesn’t own companies involved in oil or gas drilling or utilities that get power from fossil fuel sources. Investors in Becker’s fund also own stocks in other sectors, such as health care or industry, as long as their products and services have a limited environmental footprint and will be attractive businesses in a world where people are keeping better track of carbon emissions. Analyses of these companies’ carbon footprints and other indicators are becoming more mainstream, making it easier for investors to gauge whether they really are making “green” investments.

“>I totally welcome it because our objective here is to make a difference in the world as well as investing in our clients’ well being,” Becker says. “Our mission is helping the economy and evolving the capital market toward a sustainable economy.”