Investing in the Earth

This morning I perused my newspaper (the New York Journal News) to get a sense of this year's obligatory Earth Day articles. Two articles struck me as particularly interesting. The first article that got me thinking was a local article which reported findings from a consumer research firm (Mintel) that found that consumers were willing to buy green products provided they did not cost 10% more than regular non-green products. My first reaction to the story was that it was presuming the negative. Why shouldn't most green products be even cheaper than regular products. For example, energy saving CFL lightbulbs clearly last much longer than traditional incandescent bulbs and use about one-third the energy. Over their lifetime that represents a significant cost savings. So why do we think of them as more expensive?

The reason we think of them as more expensive is that they cost a bit more up front compared to regular light bulbs. We think in terms of the short term cost, not the long-term value. It struck me that this type of valueless thinking is the antithesis of the values I was raised on. I remember once going to a Sears store with my father so he could buy a new hammer. I remember him pointing out to me that the Sears Craftsman hammers were more expensive than others but that it was important to think about the durability of tools and that an investment in a good tool would always pay off in the long run. It was a good lesson and one that sunk in. To this day I won't buy a cheap tool but insist on going with well-made, quality tools, even though they are more expensive.

What I find surprising is that we won't apply this same logic to products which are good for the environment. We put up a new article this week in the Solar Energy section of the EnergyBible which talks about Calculating Payback on solar photovoltaic systems. What the article showed was that a solar energy system can save homeowners lots of money while doing something good for the planet. What's the drawback, the same as with the CFL bulbs, it costs money up front. It requires an investment! It made me think of a neighbor who recently spent $20,000 to put up a new deck on his house. He argued that it would improve the resale value of his house, an understandable reaction in the rapidly declining housing market. However, I got to thinking that if he had used that same $20,000 to put up solar panels on his roof he would have also have improved the value of his property but in addition he would have dramatically cut his energy bills for the next 25 years. Seems like a no-brainer to me but clearly he didn't see it that way.

Investment was also the theme of another article I saw this morning, though this one was found, not surprisingly, in the business section of the newspaper. The article was reporting on a recent analysis by MP Morgan Securities in which the analyst recommended that investors dump stock in companies which required significant water supplies (power plants for example) in order to create their product. The premise was simple. The supply of water is no longer meeting demand given our rapid population growth so companies that rely on water are going to be at significant risk.

I make no claims on sainthood and so I have to admit my immediate reaction to this article was to conjure up an image of a Wall Street banker who is found deceased in his office, up to his armpits in mounds of cash, who unfortunately died of thirst because there was no water in the water cooler. OK, its a tempting scenario, but the point of all this is that while much of the public is hesitant to invest in a future which will protect our planet, many others who live in the investment sector are willing to invest in the probability that we will fail and that our planet will go down in ruin. It is a morbid way of looking at the world but it is real. There is money to be made in selling the planet short, or more precisely, short selling the planet!

I would like to think that the human race has more sense than this. That we will wake up, smell the coffee, and put our money to work protecting our planet instead of destroying it. However, I suspect it won't be Wall Street investors who make this happen. It will happen when individual investors large and small spend their money wisely, by investing in things that payoff in the long run!