NJ Higher Education
Partnership for Sustainability
138 Warren St.
Newark, NJ 07102
They hold $41 trillion in assets - one third of the world’s total capital. And they are suggesting very strongly that your company start getting green. They are the Carbon Disclosure Project (www.cdproject.net,) a vast consortium of global corporations and investing institutions who believe that environmental practices and policies directly effect net value. Scarcely a commune of idealistic tree huggers, CDP backers include AIG Investments, Merrill Lynch, Goldman Sachs, Bank of America, General Electric, British Petroleum, and Morgan Stanley. They have united to guide investors on decisions based on a prospect’s climate change strategies, and to nudge companies, via their shareholders, to consider climate change in their decisions. Their reasons are strictly bottom line.
The environmental factor is becoming increasingly proof positive in the investing equation. In 2001, investment consultant, John Cusack, joined Light Green Advisors, He helped establish the Light Green Fund, comprised of the two environmentally top performers nationwide in each of 80 business categories. These were companies that competitively operated the most green or made the most green products. Since its inception, Light Green’s Eco*Index has beaten S & P index funds by four percent annually. Major investors like the sound of that. Pension funds, who control up to 45 percent of many of the nation’s largest companies, are demanding corporations set in place environmental practices and specific climate change provisions.
The concept of indexing investment portfolios and evaluating companies based on environmental standards came ushering in anew with the 21st century. In l999, Cusack approached the Bank of America and Goldman Sachs with the idea of supporting green investments. Both firms politely laughed him out of their offices, declaring that while environmental investing was nice, it entailed sacrificing profits. Today, Bank of of America is investing over $2 billion in its green-only fund. The company’s new 42nd Street headquarters has been constructed in accordance with LEEDS platinum - (the U.S. Green Building Council’s highest Leadership in Energy and Environmental Design rating.) Goldman Sachs has established an environmental investment training school at Yale University and is building a LEEDS silver-rated headquarters in Jersey City. As director of New Jersey Higher Partnership for Sustainability (www.njheps.org,) Cusack finds no end of eager students, new environmental programs, and willing corporate sponsors. So why this sudden springing into green? Cusack, who has spent the last three decades urging this trend, states “It is no longer an issue of political left or right. Rather, it is simply a matter of red ink or black - long term survival or perishing.”
* Climate of Risk. For investors, holding environmental standards has become just one more indicator of economic long term stability. The utility or manufacturer who depends primarily on coal power will loose his fuel source, according to whose estimate one follows, in two to seven years. From a bankers’ point of view, this makes our coal burner a shaky prospect for a 15-year loan. Unconcerned polluters are also finding their funding streams drying up. You personally may play ostrich and declare that global warming is only some liberal plot. But count on it, all levels of government ardently disagree. The legal strictures against dirty operations will continue to pile up at accelerating rates. Aware of these mounting green laws, both investors and lenders are shunning polluters - like lepers of eld - as unclean, and thus unsound.
Since 2004, the California Public Employees Retirement System and their State Teachers Retirement System annually earmarked $1.4 billion of its $165 Billion strictly for environmentally sound investments. Since then, other states have followed and the percentages have soared. New Jersey should soon have its own green investing law both for its state workers pension funds and the state monies as well. A year ago, then-state treasurer Bradley Abelow, working with Cusack and former Governor Jim Florio, had forged such a plan. In Abelow, Cusack found a very willing participant. After all, it was Abelow, while he was head of Goldman Sach’s global operations, who approached the SEC to call for environmental disclosure among traded companies. Unfortunately, as Abelow got tapped by Governor Jon Corzine to move up as chief of staff, this investing law has gotten temporarily stalled.
* Going Green Efficient. Environmental formulae have proved that every ton of CO2 taken out of the atmosphere saves $150 for the building owner. Whether it’s lower usage, e.g. through heavier insulation, or alternative methods, like the Garden State’s blossoming solar arrays, green’s savings cannot be denied. Real estate’s old rule of thumb says that only 10 percent of a building’s cost goes toward the purchase price. The remaining 90 percent is spent on operations. Cusack is fond of detailing how environmental outfitting may add only .5 percent to the purchase cost and provide a 20 percent savings in that remaining 90 percent. Such thrift largely explains the burgeoning of large solar arrays being installed atop many New Jersey warehouses. The 1.4 megawatt version in South Plainfield is reported to be the largest in the East. (A 2000 square-foot residence will typically meet its annual electrical needs with an 8,000 kilowatt system.) And while this turning from traditional fuels is saving business and building owners great sums, the overall impact is clear. British economist Nicholas Stern, in his Stern Review, has reported that for every 1.5 percent we lower greenhouse gas emissions, economic growth increases between five and ten percent, even in the short term.
* The People’s Choice. In addition to the cold, hard bottom line, Carbon Disclosure Project advocates are finding the environmental yardstick useful in managerial estimations. If a large corporation’s leaders can manage the complex issues of adjusting to climate change needs, it figures they can also handle other major challenges. “Also, you’ve got to realize that the investing and lending worlds have been made very small by global connection,” says Cusack. “People do not want to be seen as backing polluters.” Sullying the earth, indeed sullies the reputation. And be it a brokerage firm or a huge pension fund investor, they can’t tolerate such a smear. AIG Investments recently surveyed 2000 MBA students on job condition preferences. Over 80 percent claimed that they wanted to work for companies with a strong environmental policy.
The age old enmity between environmentalists and business has withered. Their interests have united. Few indeed are those who believe that for the environment to rise, business must fall. “It’s not a great surprise to learn that the health of our planet and the health of our economies are linked,” says Cusack. “The only astonishing thing is that it took so long for us to realize it.”
John Cusack says, “I spend half my life explaining business to environmentalists, while the other half is spent explaining the environment to business people.” He is the right man for the job. A wholly native New Yorker, he attended Manhattan College, earning a bachelors in civil engineering in l973, followed by a masters in environmental engineering. He then took his MBA from New York University’s Stern School, with a specialty in environmental finance. Typical of Cusack’s many business/environmental triumphs is his work with the German/American firm Sanitec in which polluting hospital waste was more cleanly microwaved on site, rather than smokily incinerated. Cost saving: from 40 cents down to two cents per pound. In l998, he helped found Innovest Strategic Value Advisors, a company dedicated to aligning prospective profitability with environmental practices. Three years later Cusack joined Light Green, an index fund based on companies’ individual environmental performance. Today, in addition to leading Gifford Park Associates, Cusack teaches environmental finance at Iona College. He also heads up the New Jersey Higher Education Partnership for Sustainability, which promotes environmental curricula in higher learning institutions. “These are tomorrow’s business and political leaders,” says Cusack. “And today, we’re getting them impassioned about the environment.”
Article Summary Hitching one’s investment wagon to a worn out index can rein back the entire portflio. John Cusack, of New Jersey Higher Education Partnership for Sustanability, and many of the nation’s largest financial players are pointing to the new environmental-responsibility index as a more accurate indicator of long term growth.