5 Companies Profiting While Fighting Climate Change
Apr 27th 2012 12:24PM
Updated Apr 27th 2012 12:26PM
Like most investors, you probably aim for the best possible return when picking potential investments. But as consumers increasingly clamor for companies to embrace social responsibility, good corporate citizenship is becoming a vital part of many companies' success. And it can boost the performance of our portfolios, too.
Corporate Responsibility magazine recently released its "100 Best Corporate Citizens" list for 2012, in which it rated members of the Russell 1000 large-cap index on 325 different elements related to responsible behavior. In the coming weeks, I'll delve into each of the seven categories that contribute to a company's overall score.
Today, we'll look at climate change, which gets a 16.5% weighting. To understand why it should matter to companies, as well as investors, check out part of Coca-Cola's (NYS: KO) statement on the topic:
The scientific consensus on climate change is clear, and ... Climate change could affect our business in numerous ways. Changing weather patterns could harm global agriculture, limiting the supply or increasing the cost of ingredients we use in our products. Extreme weather could impair our bottling plants, disrupt our supply chain and affect demand for our products. Even our efforts to cut greenhouse gas emissions could result in increased costs for energy, transportation and raw materials.
Here are the top-rated companies in this category:
- United Parcel Service (NYS: UPS)
- Spectra Energy (NYS: SE)
- PG&E (NYS: PCG)
- Eaton (NYS: ETN)
To earn their high scores, the companies above engaged in a variety of good deeds, including disclosing their total use of carbon offsets and their various emissions, addressing greenhouse gases in their climate change policies, and making their boards of directors responsible for the companies' climate-change policies.
Goals and progress
United Parcel Service states as part of its policy on climate change, "Our long-term strategy is to optimize the processes that consume non-renewable resources. We also recognize that UPS is a critical component of our customers' supply chains, and that we have an obligation to help them operate in a more environmentally sustainable way." Among its achievements, it reduced emissions in its Transportation Index by 6.1%, "exceeding our Climate Leaders goal for the year," and "became the first small-package carrier to offer a carbon neutral service for deliveries within the United States."
Spectra Energy devotes a sizable nook of its website to addressing climate change. It explains that it is developing carbon capture and storage (CCS) systems, which involves capturing carbon dioxide at its source and injecting it into deep underground reservoirs, ideally forever. The company has small-scale CCS projects in operation and is working on large-scale ones. It's also working on recovering waste heat, to be used for power generation.
Utility company PG&E is busy informing its many customers about climate-change issues. On its website, for example, it lets people calculate their own carbon footprint. Addressing its own role in the economy, it has been busy with its ClimateSmart program, whereby it helped reduce the greenhouse gases of its 30,000 program participants (business and residential customers) by 1,360,000 metric tons.
Coca-Cola aims to be the leader on climate change of its industry, and lists various goals as well as its progress toward them. For example: "In 2010, emissions at our manufacturing operations in developed countries were down 1% compared with the prior year and down 6% compared to [its baseline year of] 2004 ... Our global product volume in 2010 was 25.5 billion unit cases -- 29% more than in 2004 -- and our greenhouse gas intensity (per liter of product) has improved 14% since 2004."
Power management specialist Eaton has signed onto the Department of Energy's Save Energy Now LEADER program, pledging to reduce its energy use by 25% (indexed for sales) by 2016. It has also pledged to reduce its greenhouse gas emissions by 18% by the end of this year. The company regularly reports on its environmental metrics, such as the waste generated and energy used by each of its divisions.
Earning green while being green
Companies that treat employees well can boost your portfolio. A Goldman Sachs report found that leaders in social, environmental, and governance policies outperformed their peers by some 25%. That's a great motivation for even the most coolly rational investors to take social responsibility to heart. And here's one more great employer to check out: The Motley Fool.
If you're in the market for solid socially responsible candidates for your portfolio, check out the Rising Stars portfolio run by my colleague Alyce Lomax. Out of more than a dozen portfolios run by smart Fools, she was recently in second place.
At the time this article was published Longtime Fool contributor Selena Maranjian, whom you can follow on Twitter, owns shares of Coca-Cola, but she holds no other position in any company mentioned. Click here to see her holdings and a short bio. The Motley Fool owns shares of Coca-Cola. Motley Fool newsletter services have recommended buying shares of Coca-Cola and Spectra Energy. The Motley Fool has a disclosure policy.We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.
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