On Corporate Social Responsibility

The Business Times (Singapore) today has a student article on "green funds".

Typically, two categories of green funds exist in the market. The difference between them lies in the way these funds select their stocks.

The first category takes the direct approach. Funds in this category are made up of companies that produce goods or services aimed at solving environmental problems. They normally invest in alternative energy, recycling and pollution control. For example, LSB Industries provides geothermal and water source heat pumps to multiple markets in the United States. Geothermal energy sources are environment-friendly alternatives to the burning of fossil fuels, a contributor to environmental pollution.

Funds in the second category take the ‘best-in-breed’ approach. These funds seek out various sectors or industries for their respective industry leaders in terms of employing environmentally-conscious business practices. Unlike funds that take the direct approach, funds in this category may invest in an oil company, for example, as long as it is considered the cleanest oil company of the lot."

 It’s a rather superficial article.

Environment-friendly investments can achieve two objectives. Investors will be injecting capital into companies that help slow down Earth’s degradation. Also, the more investments go into companies that engage in green practices, pressure is put on others to clean up their act in order to attract further investments. Therefore, by investing green, investors are also indirectly pressuring more companies to think about Mother Earth.