Eco-Friendly Forest Stocks Pay for Investors, Study Says
12/1/99
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Title: Eco-friendly forest stocks pay for investors-study
Source: Reuters
Status: Copyright 1999, contact source for permission to reprint
Date: December 1, 1999
Byline: James Saft
LONDON, Dec 1 (Reuters) - The path to greater investor profits in the
forestry industry is lined with eco-friendly practices, according to
new studies released on Wednesday by environmental group WWF.
One showed that shares in four Swedish forestry companies which have
signed on to an environmental certification programme easily
outperformed those of four Finnish competitors which have not between
1994 and 1998.
But critics from within the forestry industry said that some of the
WWF research was flawed, relying on too small a sample and improperly
selected companies.
The four Swedish firms returned 67 percent over the period, compared
to just five percent for the Finnish companies, according to the
study.
A second study said Sweden's AssiDoman, which subscribes to the
certification programme, should get a ten percent higher financial
value over time for its forestry operations as a result of better
resource management practices.
Forestry has long been a battle ground for conservationists, who have
urged natural resourse companies to follow practices which they say
are both ecologically sustainable and profitable.
But the investment community has been largely sceptical, maintaining
that its primary purpose is to make profits.
``It's all well and good to say this is good from an environmental
standpoint, but we are showing that this makes sense from an economic
standpoint,'' Steve Howard, head of the WWF's Global Forestry and
Trade Initiative, told Reuters.
In addition to AssiDoman, MoDo, Svenska Cellulosa and Kinnevik were
all certified by a programme run by the Forest Stewardship Council
(FSC). Finnish companies not FSC certified were StoraEnso, UPM-
Kymmene, Metsaliitto and Stromsdal.
``A company's environmental performance is an excellent indicator of
its management quality, which is a primary determinant for stock
market returns,'' said Robert Napier, WWF-UK's chief executive.
STUDY SAMPLE CRITICISED
Kathy Bradley, communications director at Britain's Paper Federation,
said most Finnish companies followed a nationally run certification
programme which was nearly identical to that of FSC, undermining the
validity of the comparison.
WWF, formerly known as the World Wildlife Find, maintains that there
are important differences between the FSC system and that of Finland,
but acknowledged that the size and composition of the sample limited
the value of the study.
``These are just preliminary results,'' said Frank Dixon, of U.S.
fund managers Innovest, who carried out the research.
But while the study did not go as far as to say that FSC
certification caused excess stock returns, it did say ``that would be
a logical inference in the longer term.''
It said companies that effectively address environmental issues tend
to be better managed and that these measures can help them achieve
better prices for ``eco-friendly'' products as well as improving
forest productivity. Some StoraEnso holdings in Sweden are FSC
certified but its Finnish forests are not so it was grouped with its
national peers, WWF said.