Thursday, April 15, 2004
By GreenBiz.com
BOSTON, Massachusetts — A new study by Winslow Management Company
adds to the evidence that companies that are good to the environment
are also good to their shareholders.
Since it was created four years ago, the Winslow Green Index (WGI),
an equally weighted index of 100 "green-screened" companies,
has had a cumulative increase in value of 98.5 percent. In comparison,
the S&P 500 has had a cumulative decrease in value of -10.69
percent, while the Russell 2000 had a cumulative return of 32.77
percent.
The annualized return for the period was 16.78 percent for the
Winslow Green Index, in spite of the bear market of 2000 through
2002, while the annual return for the S&P 500 was -2.53 percent
and for the Russell 2000 was 6.62 percent.
These performance returns cover the period August 1999 through
December 2003. As always, past performance is no guarantee of future
results.
"Green stocks aren't likely to outperform their benchmark
by a factor of more than three-to-one in all cases, but our study
provides further evidence that green begets green," said President
Jackson W. Robinson. "That is, we believe companies that care
about the environment are well positioned to produce better returns
than companies that don't.
"We believe companies that take advantage of environmental
opportunities can gain a competitive advantage over their peers
through cost reductions, quality improvements, increased profitability,
and access to new and growing markets," Robinson said. "Environmentally
responsible companies also have less risk of environmental liability,
which could have a major impact on future stock prices."
Robinson's conclusions are not only supported by Winslow Management's
latest study but also by previous studies that evaluate the connection
between environmental and financial performance:
* "The Emerging Relationship Between Environmental Performance
and Shareholder Wealth," by Ralph Earle, Assabet Group (2000).
Perhaps the most comprehensive study to date, this study researched
more than 70 articles, research papers, and books discussing the
link between companies? environmental behavior, and their financial
performances as well as the performances of nine green funds.
Based on the total body of evidence, author Ralph Earle III said,
"The direction of the results paints a potentially compelling
picture of a marriage between environmental excellence and investment
performance." Assabet also found no evidence concluding that
environmental performance had a negative impact on stock performance.
* "New Alpha Source for Asset Managers: Environmentally-Enhanced
Investment Portfolios," by Innovest Strategic Value Advisors
(April 2003).
This study investigates the effects of incorporating environmental
and social analysis as part of the investment decision-making process.
The study is based on live, real time simulations for six investment
portfolios of a major pension fund during 2002. In five of the six
portfolios, the results indicated that Innovest’s social and environmental
ratings had a positive impact on performance. The study provides
further evidence that positive environmental performance can add
value to a portfolio.
Source: GreenBiz.com
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