Mark Brandon is the Managing Partner of First Sustainable (http://www.firstsustainable.com), a registered investment advisory catering to socially responsible investors. In addition to Socially Responsible Investing (SRI), he may opine on social venturing, microfinance, community investing, clean technology commercialization, sustainability public policy, green products, and, on occasion, University of Texas Longhorn sports.

Friday, December 16, 2005

$10.1 Billion Verdict Against Altria Reversed

Something like 83 percent of socially responsible "negative screeners" have a screen for tobacco companies, so for those, this headline is relevant. The stock responded by moving to an all-time high.

As I've stated in previous posts, I think it is high time that the whole SRI business re-think the concept of negative screening (screening out bad actors like alcohol, tobacco, and gambling). Does a tobacco CEO really care that there is a discount on his stock because some investors refuse to buy it? If you consider that this has zero impact on his ability to deliver earnings, I doubt it. Tobacco companies are used to dealing with a "tort" discount, which I promise has a greater effect than SRI screening. Plus, there are always value (as opposed to values-based) investors that are there to scoop up a cheap stock with good cash flow.

The more productive use of SRI Screens is to identify those companies that integrate sustainable practices for profit. I live in Austin, home of Dell Computer. In fact, for a brief period at the beginning of this decade and after I had sold Daylight Online, I worked for that company, selling corporate systems.

The problem of electronic waste has always been a threat to the computer industry. The Wintel duopoly was successful in creating "planned obsolescence", which created the need for individuals and companies to replace aging computers every three years (on average). The innards of a typical computer has enough lead and mercury to cause concern for ground-water poisoning.

Dell was among the first PC-makers to recognize the value of recycling. Most IT-managers have a graveyard of old PC's, keyboards, and monitors that are too old to use and too expensive to dispose of properly. Dell stepped in and offered free recycling of old machines when a new one is purchased. It costs Dell about $25 per unit that it recycles, but the benefits are:

  • They solve a problem for the customer by getting rid of the graveyard, enhancing customer loyalty.
  • They get the machines from competitors out, and machines from Dell in.
  • They get a sale.
  • They get the satisfaction of helping the environment, and all the positive publicity that comes with it. And, boy, have they milked it.

Recycling has gone from a cost to a profit-center for the company with a little re-thinking of the standard model. This is type of practice that SRI practitioners need to pounce on, opening dialogues with the company, creating shareholder resolutions to get them to re-think their wasteful ways.

5 Comments:

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Good Stuff Mark. Can't wait to have some wealth to throw your way............! WiRise is moving forward and 2006 should be a phenomenal year.

Happy Holidays to you and the girls!

Donovan

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