A New Kind of Fund Sees Green in Some Surprising Sectors

Cross a Wall Street quant, an investigative reporter and an environmental activist and what do you get? Light Green Advisors LLC (LGA), the sometimes politically incorrect but always common sense eco-investment firm co-founded and run by 47-year-old Jonathan Naimon.

Naimon’s hardly a household name. His approach to picking companies by looking in detail at a company’s environmental record has, for years, been available only to institutional investors. But among insiders Naimon is recognized as a pioneer in the rapidly growing field of environmental investing.

“Jonathan is the unrecognized and unsung godfather of the second stage of environmental investing,” says Richard House, who worked on a similar approach for the Center for Financial Innovation, a U.K.-based think tank. “He contributed the underlying intellectual equity and gravitas of the environmental investment movement and gave away the core ideas that other people have turned into an industry.”

Naimon’s approach may soon increase its popularity in the U.S. In December, LGA began offering, together with Chicago-based Claymore Securities, a fund aimed at consumers.

However, the approach is controversial. Included in Naimon’s “environmental” picks are defense companies like Boeing and oil companies like Exxon. These are companies that would most likely be excluded by many “socially responsible” funds. Naimon’s rationale is: instead of excluding an entire business sector, why not choose the most environmentally responsible companies in every sector based on concrete data? British Petroleum does not qualify, Naimon says, because, despite its superb advertisements about climate change, it has a poor environmental record. BP’s pipeline in Bellingham exploded in 1999, and the company has faced criminal penalties for violating environmental laws in Alaska. Picking the best of every sector, Naimon argues, gives companies an incentive to improve their behavior, rather than just do a better job of marketing.

“The reality is that we really use plastics and metals,” says Naimon. “Getting a 5-percent improvement in terms of material use efficiency in the metals industry has a bigger impact than all the windmills in the U.S.” Not only do such measures save energy, he explains, they also boost profits.

For the last five years, LGA’s Eco-Performance Portfolio of 80 stocks has beaten the S&P 500 benchmark by 1.62 percent, and has outperformed the Domini Social Index, an index that measures the performance of socially responsible funds, by nearly 27 percent.

“LGAs assessment tool is an indicator of good corporate management and good environmental stewardship,” says former Washington Treasurer Dan Grimm, an LGA investor and director at Doughty Hanson PLC, the U.K.-based private equity firm. He has a simple explanation. “It maximizes profitability and minimizes liabilities.”

Leave a Reply

Your email address will not be published. Required fields are marked *