Markets
Green Investing is the Next Big Thing
Call it greentech, cleantech or eco-investing. By any name, making the world cleaner offers huge investment opportunities.
By Jeffrey R. Kosnett, Senior Editor
From Kiplinger's Personal Finance magazine, October 2007
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Global footprint. Scan the holdings of funds such as Winslow Green Growth and Calvert Global Alternative Energy, and you'll find companies from all over the world. When it comes to greentech, the leaders hail from Britain, Denmark, Japan and Spain, as well as from the U.S. Energy costs more in Europe, so many of the region's governments and financial markets want these new technologies to succeed.
No social limitations. Don't confuse eco-investing with socially screened investing. Social screens typically rule out stocks because of the products a company makes or the way it treats employees. Many environmentally oriented advisers, portfolio managers and major investors, such as the state of California, are more interested in benefiting financially from breakthrough technologies than blackballing companies for one subjective shortcoming or another.
No hype. During the Internet mania, investment banks foisted ever-more-hopeless stocks on a greedy public. Wall Street, personified by disgraced former Merrill Lynch analyst Henry Blodget, took a well-deserved shot to its reputation. With markets in turmoil because of problems related to indecipherable mortgage securities and impenetrable hedge funds, Wall Street is less likely to play the hype-and-dump game with green stocks.
Fair prices. Although the companies we profile have generally performed well, few trade at insanely high prices. Many are large and well diversified, making them suitable for buy-and-hold investors. But we also offer some racy suggestions for those willing to assume more risk.
Growing fund interest. For nearly a quarter-century, only one mutual fund invested primarily in green stocks. Now, about a half-dozen do, and more are on the way. That will almost certainly create additional demand for these stocks. An intriguing exchange-traded fund is the brainchild of Light Green Advisors, a Seattle firm that manages green-screened money and has created several eco-indexes. The one that includes so-called light-green stocks, says LGA's president, Jon Naimon, doesn't rule out any industries but rather seeks to include companies with strong environmental records. Those kinds of stocks, Naimon contends, deserve a "green premium." Claymore/LGA Green ETF (GRN), an ETF that launched last December, tracks the Light Green Eco*Index and will put Naimon's research to the test. This year to August 20, the fund gained 1%, compared with 3% for Standard & Poor's 500-stock index.
True believers
Eco-investing runs in Christiana Wyly's blood. When she was a teenager, she says, she persuaded her father to get involved in the launch of Green Mountain Energy, a privately held Texas firm that sells renewable energy to consumers and utilities in five states. She expects businesses as diverse and unlikely as BP, the British oil giant, and Wal-Mart to become forces in alternative energy, either in their roles as energy producers or users.
Across the country in Asheville, N.C., Jennifer Woodruff's natural building-materials store, Build It Naturally, is on the same street as the congressional office where Kelly Sheehan works. Both say that their plunge into green investing is as much about sound economics as it is about doing right by mankind. If they're correct, they'll be able to claim that they cleaned up while helping to clean up. Now, that's something to feel good about.