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."

Nuclear-related utilities in Praxis' equity portfolios include Wisconsin Energy Corp., PG&E and NextERA Energy. MidAmerican Energy Co. is in its bond fund. All meet Everence's screens, which includes a requirement to generate less than 30% of energy from nuclear power.

Nonetheless, Regier says Everence ultimately wants to reduce its nuclear holdings because it's a costly energy source that poses waste storage and transport risks. "We would hate to be misconstrued that somehow we bless these companies," Regier says.

Over at Calvert Investments, the company excludes nuclear-related companies from its core Signature funds but permits them in its global alternative energy, global water and SAGE advocacy funds.

"Even with the risks, it's still important to invest in companies looking to be leaders in alternative energy," says Bennett Freeman, Calvert's senior vice president of sustainability research and policy. "If companies have legacy nuclear, we'll accept it as a tradeoff."

Calvert expects much of the world to keep depending on conventional energy sources, including nuclear power, because renewables won't be able to meet demand.

The company has long engaged with Duke Energy, a leader in trying to put a price on carbon. "They're listening and they're very engaged and open, but they can't move [on greater accountability and transparency] unless the NRC moves," says Lily Donge, Calvert's senior analyst for environment and climate change issues.

Calvert has begun dialogue with General Electric about how it expects to incorporate lessons from Fukushima to enhance processes for safety design, risk assessment and emergency preparedness at nuclear facilities where its equipment is used. It's also encouraging GE to advocate for stronger government oversight of nuclear safety globally.

"We've been very unhappy with what we view as dangerously weak and inconsistent oversight, Freeman says. "We hope this triple wakeup call [Fukushima, BP's Gulf of Mexico oil spill and the Massey Energy mine explosion] gets the attention of political leaders and regulators around the world for more emphasis on renewables."

Calvert's other nuclear-related holdings include NextERA Energy, a leader in wind power; Iberdrola Renovables, a global leader in renewable energy; and Tetra Tech, a provider of sustainable infrastructure services.

As these three companies show, sometimes it's hard to separate nuclear operations from so-called green energy investments and the overall energy equation.