Monday, January 30, 2012

Is Sustainability the Next Wall Street Bubble?

I received an email advertisement from Institutional Investor Magazine promoting a new study that shows "clean capital" companies outperforming various indices. I suspect performance means rise in share price. This is not the first time I have seen news items in the Investment media making the claim that investing in sustainability is also the way to invest in share price appreciation.

The question is, is this a self-fulfilling prophecy?

Wall Street is famous for booms-and-busts.  Booms always start out as self-fulfilling prophecies: a history of rising share price is seen as proof that share price will continue to rise, causing buyers to buy in at higher prices, continuing the historical trend of rising prices, and so on.  Until that is, the price gets so high that there is no one left to buy, and the bottom falls out.

Sustainability may be the Next Big Thing, but is sustainability sustainable?

By definition, the value choices commonly referred to collectively as sustainability are share price externals.  They are values that promote the greater good, not shareholder value.

It will be something if it turns out that corporations that adopt sustainable values also consistently deliver higher share prices, but I am skeptical.

It will be interesting to see if Wall Street can pull this off!