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May 25, 2000
Eco*Index Rewards Environmental Leaders
A new index launched by Light Green Advisors this year benefits from the environmental performance
of leading companies.
SocialFunds.com --
The growing number of broad-based socially and environmentally screened indexes demonstrate that
social investing is here for the long haul. But a new index based solely on environmental
performance stands to reach an even wider audience of more financially conservative investors with
environmental concerns.
 The Eco*Index was launched in January 2000
by Light Green Advisors (LGA), a Seattle-based investment adviser whose mission is to provide
investment vehicles based upon corporate environmental leadership. The index is a broadly
diversified, passively managed index based on the Standard & Poors (S&P) 500, comprising 313
companies with above-average environmental performance from all industry groups except tobacco.
"There are no other products now for mainstream environmental investors that exploit the
economic benefits of pollution prevention by industrial companies," said Jon Naimon, environmental
economist and President of LGA.
"We are committed to providing a product that enables
index investors to sleep well at night," added Naimon. "Eco*Index investors know that their
retirement investments are channeling capital toward those companies that are progressively
reducing the environmental burdens placed on the earth."
The LGA Eco*Index is the product
of more than a decade of research and development, beginning when Naimon was with the Investor
Responsibility Research Center (IRRC), the Washington-based investor advocacy organization.
Research conducted with Vanderbilt University in the early '90s indicated that a quantitative
approach to identifying environmental leaders could add significant value to index portfolios.
The Eco*Index uses an environmental performance scoring system, based on third-party data, to
evaluate and rank the environmental conduct of all companies in the S&P 500 index. LGA evaluates
corporate expenses associated with environmental laws, frequency and cost of chemical and oil
spills, and other environment-related costs and liabilities to identify the above-average
performers in each industry.
Besides being focused on environmental issues, the
Eco*Index's takes a distinctly quantitative approach which goes beyond corporate policy to rate
actual environmental performance. It also embraces the "best of class" in every industry, rather
than avoiding heavy industries that are an anathema to many environmentalists.
"We don't
believe environmental reporting makes one ice cream manufacturer better than the electric company
that generates the electricity used to power their operations," said Naimon. "The competitive
advantage accruing to companies with better environmental records only applies to their competition
with peers."
Competitive advantage is something LGA knows about, having launched the
European IBP LGA Global Eco Index Series with the Swedish IBP Group in February 1998. The global
index is up over 65 percent since its inception, outperforming the Morgan Stanley Capital
International-World Index by about 30 percent and rewarding a growing following among European
environmental investors.
LGA plans to launch a mutual fund to track the new Eco*Index, but
in the meantime, they handle tax-exempt IRAs and other accounts over $100,000 through both Schwab
and Smith Barney. Parametric Portfolio Associates, a PIMCO subsidiary which performs Eco*Index
portfolio implementation, can provide tax-managed accounts for both institutional investors and
individual accounts over $250,000.
Reflecting on some of the formative experiences that
led to his founding of the Eco*Index, Naimon remembers a conversation he heard between corporate
leaders considering alternative environmental "codes of conduct." "They were assessing them like
ice cream flavors, knowing that none of them would cost much," said Naimon. "What I heard was a
belief that corporate stakeholders such as shareholders should be mollified."
The
Eco*Index offers a new approach to investors that will broaden the scope of social investments to
include environmental performance-based products. Rather than focusing on qualitative screens,
corporate environmental policy, and codes of conduct, this index will continually raise the bar on
environmental performance in every industry.
©
SRI World Group, Inc. All Rights Reserved.
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