isramart : Your Funds: ‘Green’ fund cites ‘carbon footprint’

Isramart news:
Green Century Balanced fund has a carbon footprint that is two-thirds lower than the Standard & Poor’s 500 index. It also gets a below-average star rating from fund-research firm Morningstar Inc., gets a below-average score for consistent return and preservation of capital from Lipper Inc., and has expenses that are roughly average for a stock fund.

If you’re an investor with a concern for the environment, the real question is which of those statistics is going to stand out to you.

symbol: GCBLX) became the first fund to release its own carbon footprint this week, announcing results of a study by Trucost, an environmental-analysis firm that measured the tons of carbon emissions per million dollars of revenue of the companies held. The fund’s carbon footprint of 126 tons of carbon per million dollars of revenue for the fund’s holdings was about one-third the level of the S&P, and was about 100 tons lower than 16 other social investment and sustainability funds measured in a different Trucost study.

It’s not a huge surprise. Green Century avoids utilities, oil and gas companies and the basic-resources sector, all of which are a big part of the index. And if you are an investor in social funds and your agenda is environmental protection, it’s a good thing.

But it’s not likely to sway many investors to buy the fund, nor should it. Even the fund’s sponsors say as much, for now.

“We believe carbon intensity indicates financial risk, and we’d like to see more comprehensive carbon accounting and more disclosure,” said Erin Gray of Green Century. “But we realize that there is not enough data to make an apples-to-apples comparison right now, to see how Green Century Balanced stands up to any other balanced fund.”
Social investment funds such as Green Century invest with more than a profit motive. Some have an environmental bent; others are based on religious tenets. There are anti-war, “anti-terror” funds and much more.

The funds use screening processes to weed out stocks that don’t adhere to the management’s value system in the belief that the “wrong kinds of stocks” have negative issues that ultimately trickle down to the bottom line. On the environmental front, there’s no question that climate-change regulation will add a new layer of costs — what some observers call “the carbon tax,” even though it’s not an actual tariff — to companies with a heavy carbon footprint.

Avoiding those potential performance problems is important, because the screening process frequently pushes expense levels to average or above.

Ultimately, a social investor’s key decision is whether to fish in the broad pond of funds, without regard to their personal value system (perhaps donating some of their gains to their causes), or to invest in line with their beliefs.

Carbon-footprint reporting is probably not enough to make a traditional investor go social. If it ever becomes a standard among social funds, it might allow an investor to choose between different “green” funds with more certainty that the issue they pick upholds their beliefs.

Until then, Gregg Brewer, executive director of research for Value Line, noted that an investor who is truly concerned with carbon footprints might “just want to buy stock in companies that work to reduce carbon emissions.”

And while Green Century gets credit for pushing the issue — which may lead other social funds to make similar disclosures — that doesn’t mean it should get your money, even if you are a social investor.