Socially responsible investing (Part 4): Growing pineapples in Alaska

We live in a complex, changing and often confusing world. Businesses are forced to re-think and re-align to stay relevant. We all know the drive for change commonly comes from new technology. However, change also comes from consumers – reflecting personal values and priorities. 

For an example of how consumers’ environmental and social values challenge businesses, check the website of US listed cigarette producer, Philip Morris. Its homepage is headed “Designing a smoke-free future – how long will the world’s leading cigarette company be in the cigarette business?” That stark question, driven by consumer values, makes the tobacco producer’s website look like an anti-smoking campaign.

Another example comes from Mike Bennetts, CEO of petrol retailer Z Energy who told the NZ Herald, “we’re in the energy business so we’re somewhat agnostic about what we sell.” Currently, their revenue is from selling fossil fuels - in a decade or two, it might be from selling electricity. Their market is changing, and their business proposition is changing with it. 

One final anecdote is AWE, one of the largest energy producers in Germany. In 2012, its CEO was not a fan of renewable energy and said solar energy in Germany was “as sensible as growing pineapples in Alaska”. Yet only four years later, when RWE floated off its solar and wind assets, the stock market valued the new renewable energy company (Innogy) more highly than the legacy nuclear, coal and gas power assets. The market regarded the split as akin to the restructure of a financial institution, with RWE left holding the damaged “bad bank” assets.