Finance & Sustainability: The New Face of Capitalism

financial growth tree

In Newsweek’s fourth annual Green Rankings report, Brazil’s financial-banking company Santander Brasil, India’s IT company Wipro and Brazil’s financial-banking company Bradesco were the top three environmentally-friendly companies in the world. Newsweek ranked IBM, Hewlett-Packard and Sprint Nextel as the three greenest companies in the U.S. for that same year (IBM also ranked fourth globally).

In an October 2012 Newsweek article introducing the rankings, author Ian Yarrett comments on how politicians seemed less concerned about environmental issues compared to previous years, but that major businesses were still valuing the relationship between finance and sustainability. “Just look at Walmart, the biggest company in the world,” reports Yarrett. “It’s reducing waste, buying renewable energy, and using its marketing clout to pressure suppliers to be more environmentally conscious, resulting in greener products on store shelves that cost the same, or even less, than their earth-polluting competition…Companies in every industry are realizing that the pursuit of profit is intertwined with environmental and social issues. They call it the ‘triple bottom line’: people, planet, and profit.”

It seems that the relationship between finance and sustainability continue to progress as the new face of capitalism, and as Yarrett points out, sustainability does not only include the environment, but also social issues, as well as practices that allow a company to last for the long haul.

Case Study: IBM’s Sustainable Practices

As Newsweek’s 2012 winner for greenest company in the U.S., IBM earned an average score of 82.9/100 (78.9 for environmental impact, 87.0 for environmental management and 82.9 for environmental disclosure). According to The Daily Beast article (reporting on IBM’s win in the same category for 2011); IBM issued its first official environmental protection corporate policy in 1971(although the company began eco initiatives in the late 60s).  Also “IBM developed requirements for secondary containment for underground storage tanks in 1979, while the EPA waited until 1985 to create the Office of Underground Storage Tanks…” adds The Daily Beast. “…IBM released its first ‘IBM and the Environment’ report in 1990, a full 10 years before the Global Reporting Initiative released its guidelines for environmental reporting.”

IBM’s “40 years of IBM Environmental Leadership” report outlines environmental accomplishments that have taken place almost on a yearly basis. Some examples include:

  • Eliminating CFCs, carbon tetrachloride, PBBs and other environmentally destructive compounds from its products.
  • One of only a few major manufacturers (in 1995) to begin participating in the U.S. Department of Energy Voluntary Greenhouse Gas Emissions Reporting program.
  • Winning The Climate Group’s Low Carbon Leaders Award in 2005.
  • From 2010 on, requiring all its suppliers to abide by a “corporate responsibility and environmental management system.”

Other Environmental and Social Sustainability Initiatives

Cap-And-Trade Program

In 2006, California passed AB 32 (the Global Warming Solutions Act) with the goal of reducing greenhouse gas emissions to the levels they were in 1990 by the year 2020. One way they are striving to do this is through a cap-and-trade program, which was launched in November, 2012. “Under the program, the state sets a limit, or cap, on emissions from individual polluters,” explained The Associated Press’ Jason Dearen on November 14, 2012. “Businesses are required to either cut emissions to cap levels or buy allowances through the auction from other companies for each extra ton of pollution discharged annually.” Dearen added that the European Union also administers an extensive cap-and-trade program; elsewhere in the U.S., electricity manufacturers in the northeastern states are held accountable by a similar program.

Equator Principles

The Equator Principles were launched in 2003 and The Guardian’s Oliver Balch reported (on November 15, 2012) that financial institutions from 32 countries have committed to adhering to them. According to the Equator Principles’ website, the principles are based on the “International Finance Corporation Performance Standards on social and environmental sustainability and on the World Bank Group Environmental, Health, and Safety Guidelines”. Its website adds that the “Equator Principles Financial Institutions (EPFIs) commit to not providing loans to projects where the borrower will not or is unable to comply with their respective social and environmental policies and procedures.” Bank of America Corporation, Citigroup Inc., Ex-Im Bank, JPMorgan Chase and Co and Wells Fargo Bank, N.A., are examples of EPFIs based in the U.S.

Finance & Sustainability Initiative

Founded in 2010, Finance & Sustainability Initiative’s goal is to encourage its members to invest sustainably (in terms of both social and environmental sustainability). According to its website, the Initiative “comprises over 65 participants/members, representing mainstream financing and investment community, social and green finance, academia and academia service providers, civil society representatives.” Financial professionals can even earn the Sustainable Investment Professional Certification (SIPC).