MONEY mutual funds

“Green” Funds Think Apple is Ripe for the Picking

Aerial of the Main Building of Apple's new Cupertino campus.
Aerial of the main building of Apple's new Cupertino campus, powered by renewable energy. City of Cupertino

Apple APPLE INC. AAPL -1.6566% — which has been criticized in the past for greenhouse gas emissions, the use of toxic materials in its products, and working with suppliers who hire underage workers — has adopted a slew of new green policies recently and now earns better marks from groups such as Greenpeace.

For managers of environmentally aware mutual funds, the recent improvements bolster the appeal of a company whose shares are considered green in another way — by making money.

AAPL Chart

AAPL data by YCharts

While the iPhone maker’s stock is up more than 15% this year, Apple shares are still considered attractively priced, given the company’s massive earnings. This, plus improving environmental performance make Apple “the one stock you just can’t ignore,” says Anthony Tursich, senior portfolio manager of the Portfolio 21 Global Equity Fund, a so-called green fund that bought Apple in 2011 after the company began providing more emissions data.

Tursich’s biggest holding is another tech giant, Google GOOGLE INC. GOOG -1.59% , which he bought only after the search engine company made progress on renewable energy.

Environmental fund managers may be broadening their shopping lists in part because they have more money to deploy: For the 12 months ended April 30, investors put $1.9 billion of new money into the 72 funds tracked by Lipper that use environmental criteria in their investment decisions.

That’s still tiny relative to the $247.6 billion that went into all U.S. equity funds, but it represents a 5% inflow that Lipper research head Tom Roseen said was significant. The bulk of the new money, more than $1 billion, went into the dominant $9.5 billion Parnassus Core Equity Fund, Lipper said.

Apple is the top holding of the Parnassus fund, which bought most of the shares in 2013, the year the fund rose 34% and beat 72% of peers, according to Morningstar. Through June 13 the fund was up about 7% in 2014, beating 87% of peers.

Apple is also the top holding of the Calvert Equity Portfolio and the Green Century Balanced Fund, and is the third-largest stock in the Pax World Balanced Fund, according to the funds’ latest filings.

Fund managers cited a mix of reasons for warming up to Apple, including reforms pushed by Chief Executive Tim Cook and the stock’s outlook. It is up 15% in 2014 on enthusiasm for its iPhones and other pending products, as well as a stock split and a dividend increase.

In the past, Apple had taken hits from activist groups like Greenpeace — which in 2010 called it “very weak” on climate and emissions matters — and has faced scrutiny over the hiring of children at factories of suppliers that make its products.

It also earned a bottom score of “4” on its carbon footprint from the Boston sustainability advocacy group Ceres. Ceres senior manager Kristen Lang said Apple had not released enough information to get a better score, such as making public its targets for reducing greenhouse gas emissions. Google received a higher score of “2” from Ceres, which praised its spending on renewable energy.

Among other things, Greenpeace said Apple was moving too slowly to stop using hazardous materials like polyvinyl chloride plastic — often used to insulate electrical cables — and brominated flame retardants in its products. Critics worried both materials could be released from products during use or when older computers or power cords are disposed in landfills.

In recent years, however, Apple has made changes and improved its image with environmentalists. In April, Greenpeace called Apple a leader for things like powering data centers with solar arrays, wind farms and water. Ceres’ Lang said Apple might get a higher score currently based on steps it has taken since data for her groups’ report was collected last fall.

In addition, Apple this year reported a sharp decline in number of underage workers hired at its supplier facilities abroad.

Apple — whose board includes environmentalist and former U.S. Vice President Al Gore — also last year hired former U.S. Environmental Protection Agency head Lisa Jackson to oversee areas like cutting toxins from its products.

Asked about the Ceres score, Apple spokesman Chris Gaither said the company powers 94% of its global corporate facilities with renewable energy now, up from 35% in 2010. He added: “Of course, the cleanest energy is the energy you never use, and that’s why we’ve made efficiency such an important feature in Apple facilities and products.”

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