I like to consider myself an environmentalist of sorts. Maybe this has something to do with me having been raised in British Columbia, where we hippy-dippy types are endemic. It’s not uncommon on the west coast to hear about people putting their lives on the line to save an old growth forest or a group of environmental renegade pirates sinking ships in order to combat mass commercial fishing. Vancouver is the birthplace of David Suzuki and Greenpeace after all.
Anyway, I was half watching this documentary on Netflix the other night that got me thinking about my own investment strategy and the environment. It was about a ski resort some investors were trying to build in the largely undeveloped area called Invermere (which, incidentally, is in British Columbia). The documentary was like your typical Disney fairytale: evil capitalists want to develop an environmentally invasive business in an ecologically sensitive area (what area isn’t?) while socially conscious environmentalists and aboriginal groups do everything in their power to stop them. Caught in between obviously is the government that wants to create jobs and increase tax revenues without pissing off too many of its constituents.
It’s the same story every… single… time…
Is Capitalism the Problem?
But it’s also a story I struggle with every day because I’m both the capitalist investor looking to make some money and the touchy-feely citizen who wants the government to create more nature reserves to protect our planet. I mean my favourite suicidal thing to do is to hike in the middle of the woods, hoping that my jaunty weeklong strolls won’t end with me on some grizzly bear’s dinner plate. But I also like to make money and see my net worth grow.
In other words, I’m a Schrödinger investor. I’m all about having the ski resort and not having the ski resort at the same time.
Yet despite this obvious paradox, I really do like capitalism and the environment. Impossible you say? As far as a distribution systems go, I think capitalism is the bee’s knees for allocating scarce resources. The problem with capitalism isn’t capitalism… it’s that people are generally… for a lack of better words… oblivious (ok, just dumb). Most of us buy stuff we really don’t need. But because we buy a ton of crap we don’t need, we inadvertently create demand which capitalism, being the Usain Bolt of economic efficiency, is more than happy to meet. But this isn’t capitalism’s fault. Capitalism is neutral in the face of all demands. It’s our fault because we keep asking for the unnecessary.
Where there is no desire, there is no capitalism. Just bankruptcy.
Unnecessary stuff is also why other economic systems, like communism, are really no better. In centralized economic systems, the environment might win out, but only if those controlling the levers behave like benevolent dictators. What are the odds of that happening? Pretty much none. Rare is the politician that can resists the sexy charms of beautiful, beautiful greed (or weapons). Admit it, neither dictators nor democratically elected rulers have exemplary track records on this front. And there is no “this time it’ll be different” — the entirety of human history points to the same thing. We, as a species, are insatiable greedy pricks.
What does this have to do with Dividend Growth Investing?
Well everything actually. Since dividend growth investors (myself included) are banking on the hope that our dividends will grow every year, it’s reasonable to assume that some of this growth will come at some cost to the environment. Maybe not all of the time, but a lot of the time expansion comes at the cost of the destroying something that took our planet millions of years to create.
That power utility stock you just purchased? Yeah, that company just built a dam that flooded a fragile river valley that was home to a colony of rare albino pandas. That hot tech stock that sold a billion more phones than last year? Yeah that company got its materials from a mine that destroyed an entire forest full of crying baby Bambis.
See what I mean?
So what am I supposed to do? I could invest exclusively in green companies, but there as so few of them out there — and how many of them actually pay decent dividends? I could also go the other extreme, and give up the whole investing thing. I could also embrace my inner Thoreau and live like this guy. As tempting as that is, however, it too wouldn’t accomplish very much. One man living in a cave didn’t prevent the last 12 consecutive months from being the warmest on record ever. Why would my abandoning the real life version of the game monopoly make things any different?
Which brings me to my last point: nobody listens to you unless you have the potential to fatten their wallets. Sure there are exceptions (Gandhi, Mother Theresa, etc) but for the most part, that’s how the world works. When Bill Gates talks about ridding the world of malaria, the world listens. I can’t get my own friends to care about this blog, much less the state of the world’s oceans. Yet if I promised every man, woman and child a dollar for every time they read my blog, I’d be more famous than Facebook.
So what does this mean? It means I’m either a hypocrite but potentially effective at causing change (because I have money), or not-a-hypocrite but effectively ineffective at everything. It sucks.
What about you? Does the environment factor in your investing choices? Do you avoid environmental “sin” stocks? Leave a message below and tell me what you think.
As always, thanks for reading.