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Altruism doesn’t pay, nor does going green

I usually like to do posts on the lighter side for the weekend, but this came across my desk the other day and it was too good to pass up on. It’s also going to serve as the introduction of a new category I called Radical Green, items that deal with the global warming and climate change hype overkill and what’s really happening.

While I came across this on the Engineering News-Record site thanks to a weekly e-mail update I receive at work, the original study results were published in The Dartmouth, a website and newspaper from the Ivy League college of the same name. In Turia Lahlou’s article called “Eco-friendly companies face financial decline” it was noted that a pair of researchers, one from Dartmouth and one from the Tuck School of Business, were surprised to find that companies they thought would profit from going green experienced the opposite result, at least as far as their share prices.

The 46 companies studied by Professors Karen Fisher-Vanden of Dartmouth and Karin Thorburn of the Tuck School lost all told $16 billion of market share after joining an EPA government-industry partnership called Climate Leaders. The two professors were most surprised that the initial outlays to promote energy efficiency weren’t made up in energy savings. But for my money, I believe Professor Thorburn did a great job succinctly summing the idea of going green this way:

Because eco-friendly policies may be detrimental to companies, Thorburn said she believes most companies will be hesitant to alter their current practices regarding greenhouse gasses. For this reason, she believes the reduction of greenhouse gas emissions is reliant on government legislation.

“The costs to individual companies far out weigh the benefits for society,” Thorburn said. “A corporate manager’s fiduciary duty is to maximize shareholder wealth. This is a conflict of interest.” (Emphasis mine.)

And it’s because of that conflict that Thorburn comes to the conclusion that legislation is required to reduce greenhouse gases. Of course, my argument refuses to accept the premise that a reduction is even necessary and may be counterproductive if we are moving into a period of global cooling as theorized by Canadian scientists. Unfortunately, government seems to be moving in the direction of inserting itself into the free market by drafting more and more restrictive laws and regulations that favor more expensive but (to them) desirable results when it comes to curtailing carbon emissions.

In turn, the Dartmouth/Tuck research can be viewed as some proof that even incentives from government and the potential energy savings will not help the corporate bottom line. And who loses? Anyone who invests in these companies will see a reduction in their net worth, and given the vast number of people who are invested in these companies whether directly or through mutual funds, the misery is spread among most of America. We all pay for this misguided policy in the end.

Crossposted on monoblogue.






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