Green Wombat

How green is that Game Boy? Wal-Mart (WMT) wants to know. Beginning next year the retail giant will require its consumer electronics suppliers to fill out a "sustainability scorecard" listing various environmental attributes of their products, including energy efficiency, use of toxic materials and packaging size. The company will use the scorecard to help it choose which
products appear on its shelves and will also make the information available to Wal-Mart shoppers. "The scorecard encourages improvements that are good for business as well as for the environment, reflecting Wal-Mart’s view that being a profitable and efficient business goes hand-in-hand with being a good steward to the environment," said Wal-Mart executive Ross Farnsworth in a statement. "Many electronics contain hazardous materials and are disposed of improperly. The scorecard issues a better score to those suppliers who build products with fewer hazardous materials and offer electronics recycling opportunities to customers."

That means consumer electronics companies from Sony (SNE) to Hewlett-Packard (HPQ) and Kodak (EK) will have to disclose how some of their eco-marketing campaigns translate into reality. Assuming consumer electronics companies cooperate – and few can afford not to play ball with Wal-Mart – you’ll be able to see if a Microsoft (MSFT)
Zune is better for the environment than a Creative Zen MP3 player. Alas, just how green the iPod is will remain a mystery as Apple (AAPL) does not sell to shoppers seeking everyday low prices.  Dangling a carrot to consumer electronic companies, Wal-Mart on Monday also announced a design contest to create a green gadget that will rate high on the sustainability scorecard. The winner will be sold in Wal-Mart’s U.S. stores.

Bank of America’s (BAC) this week unveiled a ground-breaking $20 billion green lending initiative to finance companies creating low-emissions technology, underwrite loans for green building projects and create a carbon credit trading service for its customers.  

Bank of America also is changing its underwriting criteria for commercial loans to favor companies that provide "sustainable products, services and technologies. For consumers, BofA will offer, among other eco-friendly products a "green mortgage" with a reduced interest rate or a rebate if their new house meets energy efficiency standards.

Green Wombat talked yesterday with James Mahoney, BofA’s director of public policy, about why the U.S.’s second largest bank thinks fighting global warming is a huge business opportunity for the banking industry – and whether competitors like Citigroup (C), JPMorgan Chase (JPM), Wachovia (WB), Wells Fargo (WFC) will follow its lead.

Green Wombat: Bank of Amercia is not doing this just because it thinks it is the right thing to do. What is the business rationale behind the initiative?

James Mahoney: This goes beyond philanthropy and actually incorporates environmental considerations into the way we do business. It’s an initiative that cuts across our three major lines of business: Corporate and investment banking, consumer banking, and wealth management.   What we see, with the growing concerns about climate change, is that there is going to be an increased demand for both products and services that produce and use energy more efficiently. As efforts emerge to reduce greenhouse gas emissions, there will be new technologies to both produce and use energy. We see business opportunities arising as a result of climate change. This initiative is intended to support customers that want to take advantage of those opportunities. We definitely see this as a growth area in the years ahead.

Green Wombat: What type of commercial customers will be the biggest beneficiaries of the program?

Mahoney: I think technology companies with innovative products, utilities that are investing in green technology and green energy sources will benefit. I think for that matter, so will coal companies that are looking to introduce new ways to reduce greenhouse gas emissions in the years ahead. We think no matter what kind of business you have there are opportunities to produce and use energy more efficiently. As a bank we’re finding there are multiple opportunities to produce green business opportunities in commercial lending, investment banking, and carbon credit trading as that market develops.

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Has the carbon offset craze jumped the shark? Dell (DELL) earlier this year began letting customers pay a small carbon offset fee when they order their computers. The money is used to plant trees, which absorb carbon and thus theoretically cancel out the planet-warming greenhouse gases emitted by the production and use of individual customers’ laptops and desktops. Today Dell expanded its "Plant a Tree for Me" program to all customers – past and present – as well as, well, anyone who wants to go to the computer maker’s site and donate $99 to offset a year’s worth of their carbon emissions. Planting trees, of course, has environmental benefits beyond forests’ role in reducing global warming – though just how effective they are has been in dispute, as have carbon offset programs themselves. And Dell, along with Hewlett Packard (HPQ), certainly has made significant progress in ameliorating the environmental impact of its products through recycling programs. But absolving the sin of one’s personal greenhouse gas emissions via Visa or MasterCard is starting to become the environmental equivalent of slapping a bumper sticker on your car. Sure, it raises awareness and may be doing some real good but it does not require anyone to actually do anything to reduce their own contribution to global warming – like trading in the SUV, replacing light bulbs with CFLs or just saying no to paper and plastic. We’ll know things have really gone too far when you see Apple (AAPL) launch a "Plant a Tree for Steve" campaign.

In what could be a big boost for green tech entrepreneurs,
Bank of America (BAC) this morning launched a $20 billion program to fight global warming over the next decade by financing companies creating low-emissions technology, lending money for green building projects and creating the ability for customers to trade carbon credits. The bank will spend $18 billion on commercial green lending and finance while another $2 billion will be spent on consumer programs and efforts to reduce the greenhouse gas emissions and environmental impact of its own operations. Green Wombat is waiting on a reply from BofA whether it will use its pot of green cash to finance solar power plants, wind farms and other utility-scale renewable energy projects. But the fact that the U.S.’s second-largest bank has decided there is money to be made off green lending is, potentially, a huge boon for startups that have found it tough going obtaining financing for capital-intensive renewable energy technologies. While Silicon Valley venture capitalists have pumped billions into green startups over the past couple years, they traditionally do not finance factories or 250-megawatt solar power plants. The bank’s move also could create opportunities for green companies without access to Sand Hill Road VCs. "Today, we have a tremendous opportunity to support our customer’s efforts to build an environmentally sustainable economy – through innovative home and office construction, new manufacturing technology, changes in transportation, and new ways to supply our energy," said Bank of America CEO Kenneth D. Lewis in a statement.

BofA will change its underwriting criteria for commercial loans to include environmental factors, such as whether a business creates "sustainable products, services and technologies." In other words, a company that makes less carbon-intensive widgets will score higher on a loan application than one whose production process consumes more fossil fuels. If other banks adopt green underwriting, the impact could be significant.

For consumers, Bank of America later this year will offer an "eco-friendly" credit card – a percentage of each purchase will be donated to an environmental organization to invest in greenhouse gas reduction projects. Home buyers can apply for a "green mortgage" with a reduced interest rate or a rebate if their new house meets energy efficiency standards. "Bank of America intends to commit its own capital to promote "green" investment solutions for its clients," the company said, referring to investments that promote reforestation, wildlife management, "responsible development" and carbon sequestration.

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