The Economic Value of Corporate Eco-Efficiency

One of the biggest hurdles to the mainstreaming of socially responsible investing is the perception that there must be a sacrifice in performance to engage in SRI. The question alone is loaded, but in general, it is not so. More on that later. Innovest Advisors presented the winning paper for the 2005 Moskowitz Prize (awarded annually for research in the field of socially responsible investing) which hopefully debunks this perception once and for all. To be fair, the paper addresses SRI in terms of practicing "eco-efficiency", eliminating wasteful business processes in the course of running an operation. This does not apply to those that define SRI as screening certain companies based on certain social criteria, although that would depend on what that social criteria is.

The paper makes the point that not only is there NO penalty for investing in eco-efficiency, but that there SHOULD BE a premium attached. Ec0-efficiency is certainly a harbinger of other efficiency benchmarks. Going over the empirical minutiae would be beyond the scope of this blog.

So, it begs the point: If there is no penalty to investing with an SRI methodology, why wouldn't you?