BP makes case for socially responsible investing

Socially responsible investing is largely ignored by investors who possibly still have some deep rooted suspicion that companies that go all soft and protect the environment will be less profitable than those that focus on profit at all costs.

While we may be concerned about the environment, we are far more concerned about the returns from our portfolio. But watching BP’s share price halve turns the whole argument on its head. It is in fact because of the share price that you should be worrying about whether the company you are invested in is following environmentally sustainable models — eventually the chickens will come home to roost.

Companies that act in a responsible way or that manufacture goods that are not harmful to the environment will not face unexpected and very expensive liabilities like cleaning up the Gulf of Mexico.

A year ago I interviewed Malcolm Gray, portfolio manager at Investec Asset Management in charge of sustainable investments who argued that a company that is responsible is more likely to build capital over time compared to an irresponsible company that runs the risk of taxes and levies to recoup costs.

He said a time will come where water and air pollution costs will have to be reflected in the costs of production, possibly through taxes or legislation.

That time is now very close. After the oil disaster in the US you can bet your bottom dollar that there will be a demand for oil companies to pay an environmental tax towards a fund for future oil spills in much the same way that the US and UK are considering taxing banks to fund future bail-outs.

Gray also pointed out that companies who were not making strides to become more energy efficient would face massive future costs when energy prices soared. Already we have seen the price increases that Eskom will be passing on to businesses. A company that is focusing on reducing its energy demand is not doing it for a “feel good” factor; it is doing it to survive.

Socially responsible investing is not something to include in your portfolio to assuage your conscience, it could prove be the very investment that delivers your best performance.

Read more news, blogs, tips and Q&As in our Smart Money section. Post questions on the site for independent and researched information

Subscribe to the M&G

These are unprecedented times, and the role of media to tell and record the story of South Africa as it develops is more important than ever.

The Mail & Guardian is a proud news publisher with roots stretching back 35 years, and we’ve survived right from day one thanks to the support of readers who value fiercely independent journalism that is beholden to no-one. To help us continue for another 35 future years with the same proud values, please consider taking out a subscription.

Maya Fisher French
Guest Author

Related stories

How BP Oil Spill Fines Could Help Protect the Texas Coast

Other states were harder hit by the spill, but Texas is still receiving millions of dollars that can be used for vital restoration efforts

Measuring the impact of CSI

Identifying indicators to measure change requires research and expertise

Chasing returns is for losers

Studies have shown that investors are paying a high price for switching between funds.

How to lower the costs of retirement

Restructuring the way we save for retirement could halve our costs and a new model that changes preservation rules will dramatically reduce charges.

Retail resources in race for returns

Fund managers are divided over South African retail shares, which have outperformed resources by 20%.

South Africa gets bond bonanza

Inclusion in Citigroup's world government bond index has resulted in big fund inflows, writes Maya Fisher-French.

Subscribers only

Q&A Sessions: Frank Chikane on the rainbow where colours never...

Reverend Frank Chikane has just completed six years as the chairperson of the Kagiso Trust. He speaks about corruption, his children’s views and how churches can be mobilised

ANC: ‘We’re operating under conditions of anarchy’

In its latest policy documents, the ANC is self-critical and wants ‘consequence management’, yet it’s letting its members off the hook again

More top stories

Shabnim Ismail bowls her way into the record books Down...

The night before Australia’s Women’s Big Bash League (WBBL) final, fiery South African fast bowler Shabnim Ismail lay awake pondering how...

Hawks make arrest in matric maths paper leak

Themba Daniel Shikwambana, who works at a printing company, was granted bail and is due to return to court in January

Andile Lungisa: Early parole for the house of truth

Disgraced Nelson Mandela Bay councillor Andile Lungisa calls for a change of leadership in the ANC immediately after being released on parole

War of words at Zondo commission: ‘Grow up Mr Gordhan,...

The cross-examination of the public enterprises minister by Tom Moyane’s lawyers at the state capture inquiry went on well into overtime on Monday evening

press releases

Loading latest Press Releases…