I’ve been to a number of advisor industry conferences over the last five years–some put on by custodians or broker/dealers and others by professional associations. None, however, was quite like SRI in the Rockies, which I had the pleasure of attending for the first time this year. Yes, there were the usual mutual fund and asset management companies

represented as sponsors and program participants and an exhibit hall for firms offering to provide solutions to the advisors in attendance, but there were also corporate sponsors such as Dell, Merck, and Campbell Soup Co. There was also a palpable sense of being among a diverse group of people who share a common vision and passion.

There was a lot to learn over the course of the three-day event, with sessions on subjects as diverse as how the consideration of environmental, social, and governance (ESG) factors fits in with an advisor’s fiduciary duty, measuring the social return on investment, and active versus passive investment strategies. Having the opportunity to listen to SRI practitioners talk about their experiences and meet advisors who implement such strategies for their clients gave me a lot to think and write about in the months to come. The experience certainly made me realize that the world of SRI is deeply nuanced.

To begin, I’d like to share with you some of the things I learned that might help advisors get a different perspective on how they judge companies as potential investments.

WalMart: Saving the Planet Is Good for Business

Among the eye-openers for me was a session led by Gil Friend and L. Hunter Lovins, both of whom consult on sustainability issues to major corporations through their respective firms, Natural Logic and Natural Capitalism Solutions, and teach at the Presidio School of Management, one of the first accredited programs offering an MBA in Sustainable Management. Although the speakers warned that there’s a limited time available to address issues of sustainability, climate change, and energy sufficiency, they also warned that when things get back to “normal” it won’t be the normal we used to know.

Both Friend and Lovins have consulted on sustainability for WalMart and offered some insight into how the world’s largest retailer is addressing these issues. They pointed out that four years ago WalMart pledged to use 100% renewable energy, to produce zero waste, be carbon neutral, and to sell only sustainable products, but with no idea how they would achieve those goals. Now they’ve told all their suppliers that if they want to sell products in WalMart stores (and what manufacturer doesn’t want to sell in WalMart?) they will have to subscribe to the same goal.

“Part of this is pure financial self-interest,” on WalMart’s part, Friend pointed out. If WalMart can take a cost for energy out of its operating budget by installing solar panels on store roofs and conduct similar efforts in renewable energy projects, it helps the company maintain its position as the low cost leader. As an example of the logistical thinking that goes at WalMart, he cited a project “where they took the size of a cardboard box holding a child’s doll down by about a half a centimeter; it’s $3 million to the bottom line.”

“WalMart is doing more, I would submit, to move the needle than any of us. And that ought to be sobering to you,” added Lovins. “Who would have expected that?”

Not many in that audience, to be sure.

Tea, and NGOs

Another session that reflected how sustainability has infected the corporate mindset dealt with partnerships between non-governmental organizations (NGOs) and corporations. One speaker was Tensie Whelan, president of the Rainforest Alliance, who discussed how her organization has worked with more than 3,000 corporate partners on a variety of projects. She outlined how NGOs can help change market behavior, which in turn can lead to large-scale social change. For corporate partners, an alliance with an NGO can provide new credibility as well as access to new supply chains.

The successes of such alliances that she cited included a multinational banana company which managed to improve its reputation while increasing productivity by 27% and reduce costs by 12%; coffee farmers who were able to increase yields by 20%. To give additional credence to her presentation, the panel was one of the Rainforest Alliance’s corporate partners, Cees Talma, global brand VP for Unilever’s Lipton tea brand.

According to Talma, it was the perceived “hard business benefits,” including an opportunity to further grow the brand, that made Unilever want NGO certification for its Lipton brand. Since Lipton has launched its sustainability effort, Talma says the division managed to get access to high quality raw materials at affordable prices, which in turn allows Lipton to produce a better product and offer another point of differentiation to the consumer.

A consumer marketing effort centered around the sustainability program for the brand’s flagship Lipton Yellow Label Tea in the United Kingdom has allowed it to increase its market share while its major competitor, Tetley, remained flat. When the program was expanded to Australia, similar results were experienced and the U.S. market is next on the global checklist.

The whole experience made me realize that the SRI world has more shades of grey than I had previously realized, and little that was strictly black and white. I found evidence of a deeper awareness of the issues that drive the SRI movement in the corporate world than I had known of, which I would suggest has implications for investors of all kinds. If companies such as WalMart (and its suppliers), Unilever, Merck, and others have important sustainability initiatives that are not just public relations ploys, that begins to change the definition of what a green company is and what constitutes a green investment.

These developments are a few examples of how the ideas behind socially responsible investing have moved even deeper into the mainstream.


Managing Editor Robert F. Keane can be reached at bkeane@investmentadvisor.com.