August 28, 2013
Sustainable Investment Firms Comment on Fed Plan to Ease Stimulus
by Robert Kropp
The Appleseed Fund expresses some skepticism of the Federal Reserve's optimistic outlook, while
Green Century Capital Management highlights the World Bank Green Bonds as part of a diversified
The 2013 proxy season is over for the most part, and by late August the hard news tends to decline
a bit. But there is always much to uncover, and this morning I took a tour of the websites of
various sustainable investment firms to see what insights they might be generating.
Two recent communications—from the Appleseed Fund and Green Century Capital
Management—address the Federal Reserve Bank's announcement earlier this summer that it would
curtail its bond buying program as long as the state of the economy continues to improve.
Because of a succession of interventions known as quantitative easing, “bond investors viewed
the bond market as a one-way ticket to safe and steady returns,” Appleseed wrote to to shareowners
in late July. “Investors have come to expect ever declining interest rates and, particularly over
the last year, rushed into the outstretched arms of securities that might provide them with a
little extra yield, regardless of risk, such as junk bonds and emerging market debt.”
However, “Whether we are in the midst of a sustainable economic recovery and an end to
artificial Fed interest rate suppression is open for debate,” Appleseed continued. “After over four
years of unprecedented stimulus, our view is that the Fed will continue its money printing efforts
for the foreseeable future.”
In an article entitled Green Bonds in a Changing Market,
Green Century analyzes the Fed announcement in light of its possible effects on the firm's Green
Century Balanced Fund, 20% of whose holdings are in fixed income. “The Fed is optimistic enough
about the recovering economy to begin a reversal of its actions,” Green Century wrote. Because the
Fed's planned curtailment of its bond buying program is likely to lead to higher interest rates,
some of the fixed income products affected by the Fed's action are likely to lose value.
But, Green Century continued, “bonds are still important to hold since they can diversify a
portfolio. By design, owners of diversified portfolios seek out different types of investments
precisely because they do not move in lockstep with one another.”
The Balanced Fund holds
approximately $16 million in fixed income investments, 15% of which are in green bonds.
“Historically, it has not been easy to find fixed income investments that support large-scale
environmental initiatives and address climate change,” Green Century stated. “That’s why we were
pleased that the World Bank issued its Green Bonds in 2008. These bonds promote environmental
sustainability through its international development efforts.”
The World Bank Green Bonds
focus on emerging markets, funding programs in energy efficiency, infrastructure, and alternative
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