Increasing concern over global warming has spurred a new style of environmentally responsible investing.The Green Century mutual fund family is a leader in the space, so I took a look at the company’s highly rated Balanced Fund for some stock ideas. I discovered that sometimes, “green” isn’t found in obvious places.
Investing in Green
A recent article on Bloomberg.com highlighting environmentally friendly investing led to me to review Green Century Balanced Fund’s portfolio. The fund earned four stars from Morningstar, so it’s a decent performer. Its portfolio as of the most recent semi-annual report was filled with names I expected. However a few stood out — because I didn’t think of them as environmentally friendly.
After digging a little deeper into each company’s story, I realized that investors eager to help the environment need to look beyond the obvious. Sometimes supporting a good player in a “bad” industry is just as important as buying obviously earth-friendly stocks.
Canadian Pacific Railway Limited (USA) (NYSE:CP) was the first name to jump out at me. At first glance, a railway is anything but environmentally friendly. Taking a step back, however, Canadian Pacific Railway Limited (USA) (NYSE:CP) has been going through some big changes.
For example, it has been reworking its track network and updating its locomotive and train car fleet, among other things. Some results from this effort include cutting “operating plan train miles by 39,000 per week, a 7% improvement” according to the company; culling its locomotive fleet by some 195 engines; and shrinking its train car fleet by thousands of cars. And, as old engines and cars are pulled off, newer, more efficient ones are brought on.
As a result, Canadian Pacific Railway Limited (USA) (NYSE:CP) transports products in a more efficient and, thus, environmentally friendly manner — in an industry that’s already more efficient than using gasoline-powered trucks.
Aside from a dip in 2009, the top line has been growing steadily for a decade. The bottom line has been more volatile, but fuel is an important and highly variable cost, so that’s understandable. The dividend, meanwhile, has been on an upward climb since 2009. After a heady run, however, Canadian Pacific Railway Limited (USA) (NYSE:CP)’s shares seem most appropriate for momentum investors.
United Parcel Service, Inc. (NYSE:UPS) operates a fleet of more than 500 airplanes and 100,000 trucks. That, too, hardly sounds environmentally friendly. However, just like Canadian Pacific Railway Limited (USA) (NYSE:CP), United Parcel Service, Inc. (NYSE:UPS) provides a service the the world can’t do without, making it a necessary evil to some extent. But how evil?