Green Service Companies Investors Should Be Watching

By Stephanie Taylor Christensen “Being green” is en vogue. Retailers offer reusable cloth bags for shopping, and celebrities who drive hybrid vehicles are seen as being at the forefront of “cool culture.” Consumers have followed suit, and plan to do more of the same -- at least, that's what they claim. An October 2010 survey from The Nielsen Company revealed “that the majority of US and UK consumers would consider purchasing an electric vehicle.” However, there's a limit to how green customers are willing to be, and it rides on how much extra green it will require. The price parody between caring about the environment or not when it comes to hybrid vehicles lies somewhere in between $1 and $4,999; consumers reported that they would not consider buying a hybrid vehicle if the sticker price was $5,000 higher than its traditional counterpart.

(To see Conor Sen's article on the kind of bias that media run by all of us will have, click here.)

The green trend has spread from products into the service sector. A recent Mintel study showed that consumer interest in service companies that are "green" has doubled since 2008, including technology providers, airlines and banks. But, what does “green” mean anymore, and how can investors make use of the trend? Rona Fried, Ph.D. and CEO of Sustainable Business, which also publishes Progressive Investor, argues that despite what consumers say they care about, most aren't really aware of what companies are or aren't doing. She explains that it's partly the fault of the companies themselves. Even those making legitimate green efforts hesitate about shouting their valid sustainability practices for fear of being called “green washers,” a fear that has likely deepened further on the heels of the BP (BP) oil spill disaster. Choosing to remain silent about green efforts is a huge missed business opportunity, in Fried's expert opinion. “Big [sustainable] companies should consider being more aggressive because people do want to know. It's been proven that they outperform their peers in the stock market, and more proactive they are in telling consumers.”

(To view Carol Kopp's piece on why social conservatives and professional pornographers have an uneasy alliance, click here.)

The financial benefits of being a green business don't end at a good marketing story and potential customer acquisition. For the past three years, Sustainable Business has worked with leading green stock analysts to spot the top performers. The green companies worth watching are compiled into their “SB20” list. While not a specifically recommended “buy” list, the companies on it are chosen because they are strong both financially, and in their sustainability efforts. Regardless of sector, Sustainable Business argues that green companies have the opportunity to “ improve financial performance because products are made using less energy and materials, and less waste and toxics. These companies tend to attract experienced, visionary management and top employees. They also attract leading suppliers and customers who want to work with and buy from companies that contribute to their own green business strategies.” Here are some are the top green companies in technology, banking, and aviation that investors should have on their radar.

(To read Todd Harrison's insight into how bulls and bears are measuring the tape, click here.)

In 2008, Virgin Atlantic made headlines as the first airline to fly a commercial craft using biofuel, although many critics shrugged off the effort as a publicity stunt. When it comes to the airline industry, the term “green company” may still be a bit far off. Fried points out that the airlines industry is notorious for being “mammoth waste producers.” It's estimated that travelers produce 881 million pounds of waste per year (half of which is in-flight). Most of it is not recycled. Nevertheless, Southwest Airlines (LUV) may be at the forefront of steps in the right direction. In 2009, it unveiled the “Green Plane” to test the latest in environmentally friendly flight functions, both mechanically and in consumer-facing aspects like the type of coffee cups used, to carpet and interior design features. Now rotated into Southwest's regular flight schedules, the Green Plane looks like any other Boeing 737-700, except for a green decal on the plane's nose. In-flight marketing, like an announcement by the flight attendants that they are on “The Green Plane," a placard displaying Southwest's environmental commitment, informational buck slips at seats, and overhead bin clings about Southwest's green commitments serve to support the spread of Southwest's positioning as a “greener” airline.

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