Green Lending as an Indicator of Financial Health

The relative success of the Vice Fund is a reminder that companies can still make a profit on the addictions of smokers, drinkers, gamblers and arms buyers. The children of darkness can sometimes be wiser - socially responsible investing can indeed cost something to a portfolio. For example, I have joined in questioning alcohol screens. It's therefore interesting when good CSR practices seem to provide a proxy for the solvency of financial institutions. In January, Ceres issued a report that grades large banks on climate change issues. It puts European banks at the top of the list - HSBC (70 points out of 100 on Ceres' Climate Change Governance Checklist), ABN AMRO (66), Barclays and HBOS (61), and Deutsche Bank (60). At the other extreme, Bear Stearns gets zero points and Lehman Brothers - despite a well-received report on climate change - scored a mere 26. Other U.S. financial institutions were in the middle. Goldman Sachs invested $1.5 billion in clean energy in 2006 and scored 53. Merrill Lynch launched an Energy Efficiency Index in 2007 and scored 52. Morgan Stanley established a Carbon Bank in 2007 to help clients go carbon neutral and scored 49. The ratings were a proxy for long-term thinking and might have been used to predict the insolvency of Bear Stearns.