“Green” investing brings peace of mind for environmentally conscious Bert Gilbert. Instead of using his money to back companies he sees as polluters and exploiters, he owns stock in firms that use wind and solar energy to generate electric power andin ones with humanitarian policies. “I feel good about it,” says Gilbert, a remodeling contractor in Solsberry, an unincorporated town 12 miles southwest of Bloomington.

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Diane Packett of West Lafayette, a limited term lecturer at Purdue University, seeks consistency through green investing. “I was mostly interested in bringing all aspects of my life in line with my values,” Packett says. To that end, she withdrew her retirement money from her former employer’s stock and some mutual funds so she could reinvest in tech stocks that pass social-screening tests and in companies dedicated to health care, green energy and low-income housing.

Pam Raider, a retired Nashville social worker, felt empowered when she cashed in the far-from-green stock she inherited, especially holdings in a tobacco company she says lied to Congress about cigarettes causing cancer. She used the proceeds from her stock liquidation to buy shares in green and socially conscious companies. “We vote with our money,” Raider says. “My conscience pushed me into making my life more integral with my beliefs and values.”

Although Gilbert, Packett and Raider all want their investment dollars to support green causes and shudder at the thought of aiding oil refiners or sweatshop proprietors, they don’t relish spending their days or evenings enmeshed in the intricacies of the markets. That’s why all three have turned to a green investment advisor. As clients they simply express their desires in broad terms, and the green investment advisor attends to the details.

Bill Stant, a green investment advisor affiliated with the California-based Financial West Group, does business in Indiana from an office on the edge of Brown County’s Yellowwood State Forest. His firm bears the L.B. Stant LLC name that his father, insurance agent Louis B. Stant, established in the area. The younger Stant added socially responsible investing, or SRI, to the insurance business.

A self-described “anti-capitalist, radical, progressive type,” Stant found counseling clients on green investing gave him a way to believe in the financial services business. He entered the field in 2001, and these days 90 percent of his 250 investment clients are green investors. Most live in Bloomington but a smattering are scattered throughout Indiana.

Advisors can aid procrastinators who put off starting or augmenting Individual Retirement Accounts, 401(k) plans, stock portfolios or mutual funds, says Stant. “You’re making your life difficult in retirement,” he warns, by failing to set aside funds. Advisors can offer important insights, even when the choice of investment vehicles is among mutual funds, Stant says.

Stant often nudges customers with larger accounts into individual stocks, thus avoiding the costs of mutual funds, but finds it easier to diversify smaller accounts through mutual funds. Investing in mutual funds has a price because the funds have to pay managers and researchers, while covering rent and commissions. However, mutual funds offer the advantage of automatic diversification — investing in more than one place — which can head off disaster if a single company encounters trouble.

Caution should guide individualistic green investors who decide to pick their own stocks, the experts say. “You can’t just throw darts at these companies,“ advises Glen A. Larsen Jr., a professor of finance at the Kelley School of Business at Indiana University-Purdue University at Indianapolis. Larsen favors companies
with earnings growth and cash flow after taxes. He reminds potential investors
that “sustainability” isn’t a magic word.

While that kind of enlightened self interest forms the basis of all investing, green investing also offers the chance to change society though collective action known as shareholder advocacy. Stockholders have the right to vote on candidates for company boards of directors, speak out on issues at annual corporate meetings, cast non-binding votes on resolutions and attempt to engage management in informal conversations.

“There’s no question the disruption of business-as-usual at the corporations’ annual meetings has had a profound effect,” Stant says of shareholder advocacy, which met with management hostility when it began in the early 1970s.

At first, green shareholder resolutions seldom garnered a vote of more than 3 percent to 5 percent, says Meg Voorhes, deputy director and research director of the Social Investment Forum, a Washington-based socially responsible investment trade association formed in the late 1980s. That number of votes was not enough to sway management but enough to allow activists to reintroduce the resolutions at the next board meeting, in accordance with Securities and Exchange Commission regulations.

These days, green shareholder resolutions often net 30 percent to 40 percent of the votes cast, which many advisors consider the threshold for influencing corporate decision makers. A few resolutions even gain a majority, advisors say. The increase in votes is helping to accomplish what advocates set out to do.

“Social investing’s real purpose is to facilitate dialogue between corporations and society,” says Steven D. Lydenberg, vice president of the New York-based Domini Funds, which started in 1990. For activists, resolutions and discussion are replacing confrontation, strikes and boycotts, says Lydenberg. “If you wanted to communicate with Bank of America before 1970, you threw a rock at their headquarters,” he says.

Many green mutual funds work hard at activism. Take the Appleseed Fund, an Indianapolis-based socially responsible mutual fund. Appleseed policies encourage management teams to strive for transparency in communications
with shareholders and to operate in environmentally friendly and sustainable
ways, says Adam Strauss, an Appleseed portfolio manager.

Pursuing those ideals need not preclude seeking profit. Once again Appleseed
is an example. The fund, launched in 2006, arrived on the scene just in time for the economic downturn many are calling the “Great Recession,” which began in 2007. “The timing wasn’t terrific,” Strauss admits, but the fund has performed 13 percent above the market in general, generating a positive return since its inception.

Although green stocks proved more volatile than other stocks during the 2007 recession, they fared well in general and should continue to do so, investment, advisors say. Volatility, they explain, means green stocks declined more than the average for all stocks when the market crashed — but recovered more quickly and strongly than most as the market recovered.

Moreover, investment strategy affected how green mutual funds performed in recession, advisors say. Results hinged on whether investors and advisors pursued growth or value, chose small or large companies, or salted portfolios with bonds, which tend toward less volatility than stocks. Advisors also expect green stocks to become less volatile as they age.

In any case, green investing may have long-term advantages over investing predicated only on profits, says Erin W. Gray, director of marketing and strategic
analysis for Green Century Funds, two Boston-based socially responsible mutual
funds that started in 1991 and return all of their profits to the eight public-service
groups that founded them.

Gray notes that states, regions and some nations are introducing market-based regulation of carbon emissions. The U.S. Senate may return to its deliberations
on cap-and-trade carbon regulation, an issue still unsettled at press time, she says. Such measures would force companies to spend money to reduce carbon emissions, thus decreasing the value of their stock, she says, noting, “carbon intensity indicates financial risk.”

That also means companies don’t have to engage in a strictly green business, such as making windmills, to qualify as green. The green label fits companies that make any kind of widgets — but make those widgets in a green way. Mutual funds screen companies and find the ones working hardest to make their operations green.

Green Century, for example, has invested heavily for a long time in Johnson & Johnson, the New Brunswick, N.J.-based health care and pharmaceuticals company. “It doesn’t jump out at you as the greenest company, but it is one of the country’s largest purchasers of alternative and renewable energy for corporate operations,” says Gray.

Many companies are catching on to green initiatives. One group, the non-profit Boston-based Ceres, founded in 1989, advises companies on how to become greener. Ceres used to seek out companies, but in the last few years companies have approached Ceres because improved transportation and processes can save them money, says Matt Moscardi, Ceres manager of investment programs. Some firms are becoming greener to achieve greater efficiency, not as a public relations ploy, he says.

Yet much work remains. Ceres also alerts institutional investors, such as pension funds, to their green investing options and finds many have much to learn. “You’d be surprised.” Moscardi says, “how far behind the curve some institutions are — even on the definitions of sustainable investing or green investing.”

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