Henningsen-Picked

Paul Hawken's study on socially and environmentally responsible investing sent a shock wave through the industry. Imagine a green SRI continuum with traditional funds on one end followed by light green funds, dark green funds, and perhaps brilliant green funds. Think of this continuum as a kind of financial biodiversity. There are many entry points on the continuum. Some start with light green. The analogy is like my friends who label themselves environmentalists -- some still drive SUVs, some hybrids, some B100 [pure biodiesel], and others have traded their cars for bikes. With Portfolio 21, we are placing a data point farther out on the continuum, and with Upstream 21, we are going even farther.

Like the natural foods industry, the socially and environmentally responsible investing industry has grown rapidly from a grassroots movement started by financial activists to a trillion-dollar industry run by corporations. Paul Hawken has pointed out that unlike the natural foods industry, the socially and environmentally responsible investing industry does not have a nutrition disclosure label on the prospectus. An investor can't tell how much saturated fat is in a particular fund.

This question requires a lot of speculation. In our opinion, if the energy crisis were ongoing, then we would see many economic structural changes. Renewables would become more competitive and profitable, followed by a decline in oil stocks. Prior to this, we would most likely see higher profits from oil stocks, leading to their decline. Perhaps we are beginning to see this now as peak oil begins to reveal itself. Portfolio 21 does not own any oil stocks and may be at a disadvantage during the first phase of peak oil. However, many of the companies we do own have been working to lower their dependence on oil and therefore may potentially have a competitive advantage in the face of higher oil prices. Portfolio 21 does own energy companies involved in hydrogen, photovoltaic, geothermal, and wind power. These investments would perhaps give the fund an advantage in the second phase of peak oil.

The field has grown and gotten more competitive in recent years. Earlier this year, Portfolio 21 hired a new sustainability analyst and received an impressive number of qualified applications from all over the world. Many had a background in environmental science or sustainability as well as a C.F.A. or M.B.A. I graduated from the University of Puget Sound and the Netherlands School of Business in international business. I was a bit too impatient and radical to work for an investment company so -- against the advice of friends and relatives -- I started my own firm in the back bedroom of my house. Starting a service business does not require much equipment, other than a computer. However, like starting any business, it takes a few years of 80-hour weeks before you are making a living wage.

Roland, thank you so much for your support. As you know, we are working in a small, remote village. We have served about 50,000 hot meals to the children at the village school. We have a bicultural exchange of art and letters between the village children and children here in the U.S. Now that we have stabilized health, nutrition, and sanitation, our next step is starting a microfinance community-loan program to help repair the torn economic fabric of the village.

Great question. Actually Mattel has been helping with tsunami relief by focusing on children and schools. Relatively speaking, the company would pass the selection criteria of most SRI mutual funds. However, Mattel would not pass Portfolio 21's strict sustainability criteria. Mattel's largest customer is Wal-Mart. Does the world really need more Barbies ... or any Barbies? The answer to your question is no.

Let's be clear: Portfolio 21 invests in multinational corporations through the global market system. This system, and mutual funds in general, do not have the capacity to address most of the world's challenges. I believe the global markets are unsustainable because they rely on an economic model that expects unlimited consumption and growth from our planet, which has limited biocapacity to provide the resources for that growth. We acknowledge that this system is not set up to "trickle down"; this is one of the reasons that Upstream 21 was created. The majority of the world's population does not have access to wealth or even capital. The lack of "trickle-down" will lead to more conflict, war, and terrorism as the disparity of wealth increases.

Bainbridge Graduate Institute, with its innovative M.B.A., will give you the tools to best tackle the angles. There are three approaches to changing the economic system. First, you can work within the belly of the existing system and attempt to influence changes in behavior. Second, you can buck the system and live off the economic grid. Third, you can attempt to create new vehicles that can coexist with the existing system. I have been deeply involved in the first approach, and I can tell you that it is filled with frustrations and compromises. Because of these challenges, I am now involved with Upstream 21, which addresses the third approach.

For years, university students and some faculty have been inviting me to campus meetings to strategize on this question. The best way to put pressure on universities is to approach them through their alumni. The alumni provide large annual contributions that should be invested in ways that do not cause harm. The same strategy can be applied to churches by mobilizing the support of the congregation rather than negotiating with the investment committee. Get a list of the companies in the portfolio, and pick the three worst corporations to make your point to the people who provide the financial support for the organization. Also, employees can start a grassroots petition to show management that there is demand for an SRI fund option in retirement accounts.

There are still data gaps in our search for "the truth" regarding the net impacts of biodiesel versus the net impacts of gasoline or conventional diesel. I have been told that the biodiesel I use is a blend of locally collected waste cooking oil and oils from agricultural crops rather than 100 percent virgin oil from crops. Given the impacts of gasoline and the added emissions that war brings to the equation, I believe that biodiesel is a better choice than gasoline. This is a best-of-class situation while I wait for hydrogen (made using photovoltaics to split water) rather than any kind of long-term sustainable solution. Obviously, public transportation or biking is the best choice.