Sustainable Development for Sale

Sustainable development for sale

(article by Eric Reguly in The Globe and Mail, June 8, 1999)

The term "sustainable development" has become such an effective marketing tool that you wonder whether it was invented by brilliantly warped minds on Madison Avenue. Further proof that it is becoming the greatest feel-good concept since "Save the Whales" came yesterday when a Toronto partnership launched what it claimed is the continent's first sustainable development mutual fund. Buy it and you'll do the planet and your investment portfolio a favour, or so its backers would have you believe.

The YMG Sustainable Development Fund, launched by YMG Capital Management, a money manager, and the Sustainable Investment Group,a consultancy that ranks companies on the "SD" scale, effectively owes its existence to the United Nations 1987 Commission on Environment and Development. Better known as the Brundtland Commission, it defined sustainable development as meeting "the needs of the present without compromising the ability of future generations to meet their own needs."

Unwittingly, the Brundtland Commission spawned a worldwide campaign that confused the debate on sustainable development while cheapening its value. There was, for example, little argument on whether modern societies would embrace sustainable development practices if that meant less consumer choice and higher prices. Instead, sustainable development, as ill-defined as it was, became part of the rhetoric of the politically correct movement. Now, a dozen years after Brundtland, it is hard to find an industry, company, executive or municipality that does not wave the sustainable development flag. They have replaced the mission statement as examples of official hyperbole.

Most companies say they are committed to it even though the concept, in its narrowest interpretation, can be patently absurd. Oil and mining companies, by definition, cannot sustain themselves because they are in the business of extracting finite resources. They get around this by inventing their own convenient definitions of the concept. To some companies, sustainable development does not mean sustaining the resource, but sustaining the company itself. Apparently, this means substitutes for oil and minerals and trees will be found once the real things have disappeared.

Companies have become expert at delivering slick sustainable development messages. The literature is typically contained in brochures and reports packed with photos of untouched landscapes and frolicking wildlife. They all talk about their efforts to minimize the "impact" of their operations on air, land and water, although few say exactly how they will achieve this or discuss the cost to shareholders of eliminating the old polluting ways. Of course, the brochures highlight the good and play down the bad. Shell International, for example, barely mentions the damage it did to the Ogoni people and their land in Nigeria.

Now that an entire industry has built around the sustainable development movement, it was inevitable that someone would come up with a fund of the same name. The YMG Sustainable Development Fund, in spite of its claims, is probably not the first of its kind — a product with a similar theme, the Clean Environment International Equity Fund, was launched in Canada in 1993 — but it appears to be the first mated to an extensive screening process.

The 50 companies that made the cut, including Suncor, Falconbridge, DuPont Canada and Bank of Montreal, were evaluated on 80 to 160 environmental, economic and social variables, depending on the industry they're in. But if you thought that magic 50 were the cleanest, nicest, most socially responsible companies around, you'd be wrong. Suncor's pollution levels are actually on the rise as it expands its energy-gobbling oil mining operations in Alberta.

Companies that do little damage to the environment, such as banks, make the list because non-green variables are given equal weighting. For example, a company's commitment to local hiring, town hall meetings and even support for school lunch programs holds the same significance as water consumption and toxic emissions. If a company fails in one category, it can make it up in another. Similarly, a company that has been a model environmental citizen may be rejected from YMG's portfolio if it falls down in "aesthetic values" or "recreational support."

In reality, YMG's creation is another form of ethical fund and, like all ethical funds, share performance is worth more than ethics. No one will buy the YMG fund if it fails to at least match the broad market indexes, which helps to explain why portfolio membership depends on social and economic criteria as much or more than the hard-core environmental standards.

The YMG fund may perform well and, if it does, more investments under the sustainable development moniker will no doubt come to life. The more this happens, the more meaningless the term will become. Sustainable development is a concept that deserves serious debate as rising populations fight for clean air and water. Unfortunately, it has formed the basis of yet another glib marketing campaign.

Home Commentary

News & Views