Money Talks is a collection of daily columns from The Business Network, which airs weekday mornings on CBC Radio One at 5:45 a.m. ET (6:15 a.m. ET in N.L.).

By Duncan Stewart, director at Deloitte Canada Research in Toronto
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Canada already has a pretty limited stock market when it comes to green technology investments and you don't want to do anything that makes it smaller than you have to. But for people looking for stocks in the space, you've got to be careful about this phemonon called green washing, this is when companies or products try to pretend they're green when they actually aren't.

I just read a study on Tyler Hamilton's blog, clean break. It talked about a firm called Terra Choice that looked at a bunch of products out there that said they were green. And it determined that actually in a huge percentage of the time these weren't really green products at all.

Some of the deceptions that they practiced in was they had bad trade offs. They would say they were a green product, but in fact when you looked at the total picture it was nowhere near green. They were a little bit organic in one way, but maybe at the cost of filling up a thousand landfills. That happened 57 per cent of the time, according to the study.

And the other one that happened an awful lot was the zero proof argument, and it's where somebody would say "this is a green product or an organic product" but there was no evidence whatsoever to back it up. And I think in the stock market that's something we're seeing a lot of the times. There are a lot of companies out there that do in fact claim to be green. And either they are net, net not green or not environmental at all or they offer no proof whatsoever.

So, what's the answer for somebody who wants to get into this very promising sector of the market, but wants to make sure their investments are in truly green companies? And I think the answer is due diligence. You need to actually do some research and don't just look at a story you may see in a newspaper or the front page of any given website. It's important to actually go through, drill down and try to figure out if - on a total basis - this company is actually an enviornmental company or not.

Certainly one of the other important considerations is finding out what percentage of their revenues are actually from green products. Maybe they're green only one per cent of their revenues, you don't want to buy somebody who overall is perhaps harming the environment.

So, what's the advice I would give for investors out there? And the answer is call up and ask. That's what investors do, that's what professional investors do, that's what mutual fund managers do. That's also what Deloitte did when we put together the Green 15 this last year. We called up companies, we tried to verify that they were in fact as environmentally friendly as they claimed to be.

At the end of the day research is always something investors should do on any given stock and it applies in the green space as well.

-- Duncan Stewart

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