Can a green company justify investing in a decidedly non-green firm?

The instinctive answer is no, but then what if the green firm uses its influence over the purse strings to force the environmental laggard to clean up its act. That's got to be good, right?

It is a hugely complex issue and one those in the green investment community are struggling to agree on.

This week Standard Life Investments through the debate into sharp focus by announcing its ethical funds had divested all their stock in airlines and would no longer invest in the sector.

Only 30 per cent of its investors had advocated such a move, but the investment firm insisted this was a significant enough proportion to prompt the bold step. Cue much wailing and gnashing of teeth from the airline industry which argued that a) it was being unfairly victimised, and b) the best way for investors concerned about the environment to influence airlines was to invest and make their concerns known.

Of course, Standard Life's move is towards the extreme end of the spectrum, but plenty of mainstream investors are similarly edging away from the most carbon intensive firms.

Citi, JP Morgan Chase and Morgan Stanley, for example, all signed up to a new set of investment criteria this week that commit them to taking carbon concerns into account when investing in the energy sector. The so-called Carbon Principles leave the banks more than enough wriggle room to justify investments in fossil fuel based projects, but they also mean they will increasingly favour the more environmentally friendly operators.

Meanwhile, those firms daft enough not to respond to the Carbon Disclosure Project's request this week for information on their carbon emissions will hardly be doing their relations with investors any favours. 

It is this pressure from the money men, coupled with the emergence of carbon reporting legislation such as that being proposed in Australia, that is forcing more and more firms to keep track of their carbon emissions.

Thankfully, there are plenty of firms springing up to help provide this service, ranging from companies offering to calculate emissions associated with your marketing efforts to those developing ways to keep track of your IT emissions.

Ultimately it is this day-to-day requirement to account for carbon and appease investors that will do far more to drive carbon emission reductions in the medium term than any dubious biofuels or decades-long research projects into hypersonic jets that might not be that green after all.

Right, I'm off to hot wire a Honda Civic Hybrid and use it to hunt down a polar bear while trying to work out how to save Defra a billion quid.

Have a good weekend,

James