SUSTAINABLE DEVELOPMENT FOR SALE
Michael Eisenscher
SUSTAINABLE DEVELOPMENT FOR SALE
By Eric Reguly
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.