INTRODUCTION In Chapter 2 we outlined the three major considerations in a SRI portfolio – environmental, social, and corporate governance. In this chapter, we focus on environmental issues that impact corporate performance and increase risk for investors. Specifically, eco-efficiency, environmental impacts and environmental management are discussed. We then present water scarcity and climate change as two important case examples of environmental risks. Environmental issues are no longer just a problem for select industry groups, such as a natural resources extraction company like lumber and mining. Media attention is no longer solely focused on conservation groups protesting about environmental destruction in old-growth forests. These days, environmental groups use mass marketing campaigns targeting all companies, from producers who use raw materials, to the distributors, retailers, and even end-users. Such scrutiny has compelled companies like Wal-Mart Stores to publically state their goals for sustainability, energy efficiency and carbon emissions, and include NGOs, academia, and government in their framework. Even more important, they have implemented a program in which their suppliers are held to the same goals and standards (see Wal-Mart Stores 2009). It is not surprising to see an increasing trend of companies producing sustainability reports and working in collaboration with environmental groups. Once in contentiously opposite camps, NGOs and corporations have formed working relationships to tackle environmental issues. As we will see throughout this chapter, pressures and drivers on companies to look at their environmental footprints means that investors now have some additional extra-financial information on which to base their estimates of risk...
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