The world is going green, but one of the biggest obstacles is the conventional wisdom that individual actions don’t matter. Of course, as anyone who’s willing to do some research discovers, when it comes to green matters, conventional wisdom is often wrong. (See my Investment Advisor column, “Who Knows?” in the August 2008 issue.)
The same is true for the conventional wisdom on green investing. Matthew Kiernan, chief executive of Innovest Strategic Value Advisors and author of Investing in a Sustainable World: Why Green Is the New Color of Money on Wall Street (Amacon Books, 2008), is not only challenging that conventional wisdom, but in his own words, is attempting to “re-engineer the DNA of Wall Street and of capitalism.”
Kiernan founded his research firm in 1995 after stints as the first director of the World Business Council for Sustainable Development, which at the time included the CEOs of about 40 global corporations (since increased fivefold), and which Kiernan says is intended to be “the big business voice on sustainability,” and as a senior partner with KPMG on the strategy consulting side. At KPMG he had seen a billion-dollar privatization deal nearly blow up because of environmental factors.
“All of that led me to a couple of conclusions that not only were the genesis for the company, but for the book,” he explains. “There are only two ways that I know of to turn a CEO into a ‘greenie.’ One would be to have his 16-year-old daughter harangue him at breakfast about his company dumping cyanide into a river in Spain and killing the fish, which is extremely effective, but tough to scale up.
“The other way is to send him a message through his financial oxygen supply,” Kiernan continues. “To me the task became bringing these considerations from where’d they’d been–which was totally at the margins, or off the radar screen entirely–into the center of the process.”
He saw the need for credible research on the sustainability aspect of companies. He felt that if he could show Wall Street that two companies that look to be almost identical, “but one of them was significantly better positioned on these over-the-horizon issues, then capital markets logic suggests that the ‘good guys’ would attract more capital and the bad guys would be incentivized to improve so they could, too, and they would pay a higher cost of capital until they did.”