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Ethical Investing, Lesson 10: Green Is Good

Only one planet - Earth - is currently known to be capable of sustaining human life. If this planet becomes uninhabitable, nothing else will matter. Wealth isn't a bad thing, but we can't eat money. Therefore, the wise ethical investor places a priority on environmentally friendly companies. Companies with a commitment to the environment may encompass a wide variety of industries, including but not limited to green energy and green products. Even activities which are not traditionally endearing to environmentalists can make a contribution to sustainability.

Greener Defense

The U.S. military performs an essential service that should not be overlooked or undervalued. However, the Department of Defense, as an organization, is the largest consumer of petroleum-based products on the planet. Tanks, humvees, helicopters, ships, and submarines all need to be powered and fueled. Military personnel are sent to many different countries, requiring more fuel to be used. And, of course, military bases all need electricity.

Environmentalists and anti-war activists point out that ending current conflicts and withdrawing troops from areas where their presence is not strictly necessary would save resources, money, and lives. This may be true, but it is not necessarily the entire answer.

Enter Boeing (NYSE: BA) and Siemens (NYSE: SI). This summer, these companies announced their alliance, with the intention of developing and marketing smart-grid technology for the U.S. Department of Defense. This initiative is, of course, only a small portion of the business generated by these two global corporations.

I previously wrote about smart grids for Greenopedia. In a nutshell, smart grids match the varying supply of electricity systems to the varying demands of consumers. Smart grids are cost-effective, and are less vulnerable to blackouts, natural disasters, and - of great importance to the DoD - terrorist attacks. In the event of a disaster, smart grids can be used to re-route the power supply around a service disruption, quickly notify repair crews of the disruption's location, and ration business or residential power to keep emergency services running smoothly. Additionally, Siemens and Boeing's proposed smart grid technology would integrate renewable energy.

The DoD is the federal government's largest energy consumer, so if smart grid technology was implemented on military bases, the savings in both energy usage and taxpayer funds could be substantial. Loss of productivity due to power shortages would likely decline as well. 

Boeing is a great company with a solid balance sheet. It's one of the world's leading defense, security, and aerospace businesses, and the biggest manufacturer of military aircraft. Valuation is good, and the stock pays a 2.5% dividend. The stock has also fallen from its May high of $79.95 to $71.01, so it's not a bad time to invest.

Siemens is a well-established industry leader in electronics and electrical engineering, known for developing high-quality, innovative technology. At $92.83, the stock is very close to its 52-week low (Siemens hit $145.94 in April), and pays a 3.2% dividend. The company's balance sheet is very strong. Siemens' price to cash flow and P/E are now unusually low, providing an opportunity to buy under $93, a price which reflects fear of a European debacle. Siemens will power through (pun intended) any such events, and ultimately provide satisfying shareholder returns.

I like the benefits of smart grids, I like Boeing and Siemens' proposed secure smart grid technology, I like Siemens stock under $93, and I like Boeing stock under $72. Ethical investors may need to be patient, however - smart grid technology is continually being fine-tuned, and it may be a few years before the first smart grid is implemented on a military base.

Written 12/18/11

Disclosure: I do not own, and do not currently plan to purchase, any shares in Boeing or Siemens.


Stocks: BAEGY