By Jerilyn Klein Bier
Nuclear-related companies have never been popular with socially conscious investors. Despite offering a low-carbon energy alternative, nuclear power is generally viewed as too risky--a point driven home by Japan's Fukushima Daiichi power plant disaster earlier this year.
That said, some socially responsible and faith-based investors aren't ready to bail on nuclear-related companies, even if they're not gung-ho about the sector.
"We don't seek to invest in nuclear," says Julie Gorte, senior vice president for sustainable investing at Pax World Investments. The general problem, she says, is there's no long-term storage solution.
Yet avoiding nuclear power, which now generates nearly 20% of the electricity produced in the U.S., "would be a severe economic disruption," says Gorte, who views it as a bridge until better energy sources are found. As such, Pax doesn't automatically shun utilities with nuclear operations, provided that they're highly committed to the deployment of renewable energy and the reduction of greenhouse gas emissions.
Pax has several caveats regarding its nuclear-related investments. For starters, it won't invest in a company if nuclear power exceeds 50% of its generated energy. And utilities with new power plants must first address concerns over safety, fuel storage and disposal. In addition, Pax also considers the company's stance on public policy toward climate change and energy restructuring.
In the aftermath of Fukushima, Pax reviewed the safety conditions of nuclear power globally. Gorte says she got much of her data from the U.S. Nuclear Regulatory Commission and the International Atomic Energy Agency.
Her review updated the statistics on significant safety problems at all U.S. reactor facilities, examined the location of all GE Mark I boiling water reactors (the kind involved in the Fukushima accident) and assessed information on the failures of emergency diesel generating units worldwide.
Pax currently holds one nuclear-related company, the Finnish utility Fortum Oyj, which Gorte says is committed to limiting carbon dioxide emissions, gets just 18% of its power from nuclear operations, doesn't have GE Mark 1 reactors, and isn't exposed to coastline risks like in Japan.
Pax World International Fund portfolio manager Ivka Kalus-Bystricky likes Fortum's low-carbon generation portfolio. She says Fortum benefits from a high hydrocarbon pricing environment, generates substantial cash flow, has a strong balance sheet, and sports a dividend yield of more than 5%.
Nuclear Engagement
Praxis Mutual Funds has a "middle of the road" philosophy on nuclear power, says Mark Regier, director of stewardship investing at Everence Financial, the faith-based investment services organization that advises the Praxis funds. He notes that economic realities and energy dynamics make it "difficult to discard any one source of energy off the cuff."