You are hereOverview: Returns and Externalities

Overview: Returns and Externalities

With Responsible Investing you can invest your assets to match your values of conservation and protection, get roughly the same return on your investment, and get much more!

When you invest sustainably you are causing good things to happen. Quite often, if a company you invested in does something good for the planet and/or society, it may help it be more profitable. However, the return may also be intangible, improving your world not simply your asset base.

We all know that the world is connected. From scientists to poets to politicians the notion of the interconnectedness of nature and humanity is generally accepted, though arguments about the details are common. One important issue comes from economics, where the term ‘externality’ refers to external costs or benefits that are not reflected in the price of a product.

An example of a negative externality, one that causes a cost, is air pollution caused by manufacturing. Manufacturers are allowed to pollute rather than spend the money to produce without creating air pollution (smoke stack scrubbers, better pollutant containment, non-polluting methods and raw materials for manufacturing). The cost of air pollution to society is great, but very hard to determine exactly how great since the costs can emerge years later. For example, the costs of climate change to all of society (which must include all people affected – the entire planet) will occur roughly 100 years after the pollution, green house gases, began to be dumped into the atmosphere at significantly greater amounts.

In this way, much of the cost of manufacturing is avoided by simply pumping pollution into the air. The consumer gets a cheaper price, but society at large must bear the burden, a burden which often comes in the form of health and environmental issues.

With Responsible Investing you have the information and the power to invest in companies who do not pass their operating costs off on the general public.