How Going 'Green' Can Make You Rich

Cary Krosinsky reports that companies--and the investors who follow them--make out like bandits when they're environmentally responsible.

Published: 18-Oct-2011

Many would agree that we are entering a world of peak oil and rising energy prices. There are pending fresh water and food shortages and price increases in many parts of the world, coupled with theoretically unsustainable—yet inevitable—increases in population. Other effects of climate change threaten, from warming seas to shortages of arable land and biodiversity loss. Yet the majority of investors do not take such things into consideration.

Increasingly, evidence suggests they should. Companies that actively manage environmental risks—and take advantage of associated opportunities—increasingly seem to outperform those who don’t in the stock market. That could be a very good thing, both for shareholders and the planet.

Take NEWSWEEK’s Green Rankings, for example: companies that ranked in the top 100 of the 2009 ranking, weighted equally, outperformed the S&P 500 by 4.8 percent over the last two years. These companies are collectively up 15.2 percent, compared to 10.4 percent for the S&P 500. The case gets even stronger when you look for undervalued companies using an analysis of financial metrics, as Value Line performed for us recently. Looking at 30 of the financially strongest of NEWSWEEK’s top 100 finds a two-year return of 24.1 percent, outperforming the S&P by 14 percent.

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