Q:  What is your investment philosophy?

A: Our investment philosophy is to find and invest in companies that have positioned themselves to steer through the increased demand for diminishing natural resources, coupled with the deteriorating environmental situation.

We look for companies that are taking steps to reduce their dependence on natural resources by either developing renewable resources or becoming more energy and resource efficient, reducing waste, and as a result, reducing their cost structure.

Q:  What are the criteria you evaluate these companies against?

A: We evaluate their impact on the environment, and their liabilities in that regard. We have six criteria. The most important is the direct impact of the company’s products and services on the environment. We look for companies that are engaging in product lifecycle analysis – they are evaluating their raw materials, they have supplier requirements in place, and they are also taking steps to improve the packaging and transportation in regards to distributing their products; they develop programs to take back and recycle their products, as well as to make their products energy efficient.

Next, we determine whether their investments are in line with their overall environmental business commitment. We look at where they are allocating their research and development dollars, and then we also consider mergers, acquisitions, divestitures, investments, and new plant equipment.

The next area we focus on is leadership. We like to see the management of the company taking a proactive approach. Then we take a look at the company’s environmental management systems to see if the company’s facilities are certified to ISO-14001 standards. Then we look at resource efficiency in terms of use of energy, raw materials, waste reduction and reuse.

Finally, we address the issue of environmental risks and liabilities. We examine if the company has been successful in reducing its CO2 emissions and make sure that there are not outstanding environmental liabilities like superfund sites, spills or toxic releases.

Q:  How many companies do you generally put through this evaluation process?

A: We have a list of approximately 200 potential candidates. We check our portfolio and see if we are underweight or overweight in certain sectors or industries. We also consider the financial attractiveness of a particular company. This is a very dynamic list, and we add to it over time, finding companies that are positively mentioned in the news as to taking steps to improve their environmental standing, or companies that have released an environmental report or a sustainability report. We take a look at that report and see if a company has a chance of potentially meeting our criteria, and if so, we add them to this list.

Q:  Are you US-focused, or are you a global fund?

A: We are a global fund. We launched the fund in September of ’99 and our intention initially was to develop a domestic fund, but we soon realized that we couldn’t qualify enough U.S. companies to create a well-diversified portfolio. Right now, about 25% of the fund is invested in U.S. companies, and about 10% in Japanese companies with the remainder allocated mostly toward Western Europe. We also have holdings in Australia, Hong Kong and China.

Q:  Can you give an example of an actual company that turned into a holding?

A: Novozymes, a Danish company, is the largest manufacturer of enzymes used in a broad array of production methods. Novozymes has developed an enzyme to break down corn and sugars and turn it into ethanol, an alternative fuel. They have invested heavily, improved this enzyme and reduced the cost of converting corn or sugars into ethanol by a factor of 10. They are continuously striving to improve this efficiency and as a result, they are seeing tremendous growth here.

We have held Novozymes for a considerable time. They publish an environmental report indicating their factory improvements in terms of emissions and use of raw materials, and their facilities are all ISO-certified. Our research team looks at all of this information and makes a decision based these factors. I’m not going to submit a company to the research team unless it’s attractive from a financial standpoint, in terms of growth, valuation and portfolio correlation. If we are underweighted in the healthcare sector, I’ll actively seek out companies in this area to help increase our exposure.

Q:  Are you looking for some particular growth characteristics?

A: We are looking for companies that have been growing at a decent rate over the past 5 to 10 years. We are looking at companies that are profitable and reporting consistent earnings growth.

The growth rate depends on the sector. If we are looking at a computer or semi-conductor company, a good growth rate would be at the market or above, so if the semiconductors market is growing at a 10% clip per year, then we’ll look at companies that are growing at least at that rate or more.

Q:  Do you measure yourself against any benchmark?

A: We use the MSCI World Index as our benchmark, which is the most widely recognized and used global benchmark for developed markets. We look to align our portfolio to come close to the allocation of our benchmark. Even though we may see more growth in a particular industry sector, we still want exposure to other sectors that aren’t growing as fast due to the world market demand. We are looking to maintain a well diversified portfolio with exposure to all industry sectors.