Letter from America: US investors finally wake up to sustainable considerations

From the land of the free to the land of the green?

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David Harrison of Rathbones
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David Harrison of Rathbones

Investing sustainably should not mean sacrificing returns, and today the notion that the former inevitably leads to latter seems to be losing credence, writes David Harrison, manager of the Rathbone Global Sustainability fund.

Incentives

For many companies, structural shifts towards better technologies, materials and practices could offer a decade or more of revenue growth.

For principled executives thinking of the world they will pass on to their grandchildren, that is a bonus; for anyone else, that is a very powerful incentive.

One US company that is a good example of how to integrate sustainability analysis into core long-term planning, with the effect of driving higher returns on capital, is Milwaukee-based AO Smith. 

The company has led the way in electric, gas, instant and solar appliances, with innovations that slash power bills. The company holds a strong market position and invests significant capital in developing new technologies that save energy and their customers' money. 

Heating water is energy intensive, so quality boilers can significantly reduce day-to-day emissions. Management are also expanding into water treatment technology, which could represent a significant new business channel.  

There is also promise in smart-metering companies that use digital tools to monitor water usage. They can help households and businesses keep track of usage, saving money while helping reduce waste. In the US, almost a fifth of fresh water is lost through leaking pipes and theft. 

Another Milwaukee-based firm, which specialises in smart-meter tools is helping combat the problem. 

Its partnership with telco giant AT&T also means it can offer measurement services to towns and cities to manage their infrastructure. The business is scalable, growing and, most importantly, helping the drive towards greater sustainability.

The message about sustainability is clearly gaining traction in the US.  I believe that as more companies demonstrate the positive impact this has on their long-term returns, the more momentum will build.

This has a 'positive flywheel' effect of presenting more investment opportunities and helping to address the pressing issues we all face. 

So not only does sustainable investing allow you to stick by your values, but it also has the potential to generate greater returns than would be the case without these characteristics.

On my road trip, I had the privilege of visiting lots of companies run by people who genuinely get this.

In the US, the dollar was always king and other factors were sometimes secondary.

But I think that has already started to change. US business people can be some of the most cynical in the world when it comes to money. 

If they are coming around to sustainability and environmental considerations, anyone can.

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