For those determined to put their money where their passions are, the world of environmentally conscious investing offers a growing list of opportunities.
For those determined to put their money where their passions are, the world of environmentally conscious investing offers a growing list of opportunities.
The challenge, assuming that those same passionate investors also want to enjoy some positive returns, lies in sifting through the political and economic realities of what now constitutes green investments.
One can rejoice in the knowledge that the Obama administration is allocating $90 billion toward the development of so-called clean technology. The administration has also pledged to spend an additional $150 billion over the next 10 years on the "greening" of the U.S. economy.
That said, some major obstacles remain — namely in the form of stiff competition from traditional energy sources. Indeed, many fledgling green companies rely on government subsidies in the form of tax credits and deductions. That dependence makes them vulnerable to changes in the nation's political landscape, according to some.
"Many of these companies will never be able to operate independent of the subsidies, primarily because of competition from the existing alternatives," said Steven Rogé, a portfolio manager at R.W. Rogé & Co. Inc., a Bohemia, N.Y.-based firm with $160 million under management.
EARLY MOVERS
Even so, that isn't stopping proponents of green investing from trying to flesh out some early movers in select categories.
Consider, for example, water.
With roughly $1 trillion spent globally every year to bring water up to standards for use and consumption, this might seem like a potential gold mine for innovation.
Even if green investing is not your bag, the fundamentals of water supply should be enough to get your attention.
Despite the obvious presence of big oceans, lakes and oft-overflowing rivers, 97% of the Earth's water is unfit for human consumption, and of the remaining 3%, roughly two-thirds is inaccessible, according to experts.
Of the remaining 1%, about half is carelessly or unavoidably wasted, experts said.
"Water is not replaceable, and it's not reusable, yet the waste rates are in excess of 50%," said Andros Florides, a portfolio manager with KBC Asset Management Ltd., a Dublin, Ireland-based firm with $470 billion under management.
He is part of a team that is subadvising two new green-investment funds offered by Calvert Group Ltd. in Bethesda, Md.: Calvert Global Alternative Energy (CGAEX) and Calvert Global Water (CFWAX).
With the water situation as it is, Mr. Florides believes there is a case to be made for investing in utility companies such as the San Jose, Calif.-based California Water Service Group (CWT) and Bryn Mawr, Pa.-based Aqua America Inc. (WTR).
One step beyond the kinds of companies likely to benefit from increased demand are those that could benefit by introducing greater efficiency into the water recovery system.
Sarasota, Fla.-based Roper In-dustries Inc. (ROP) and Liberty Lake, Wash.-based Itron Inc. (ITRI), for example, provide cutting-edge metering products and services for the utilities.
"The new metering technology helps to properly quantify and charge for service, which means a more efficient use of time and more reliable meter reading," Mr. Florides said.
WIND AND SOLAR
Wind and solar energy are also hot-button areas for potential green investments. And as with water-conservation investing, the strategy looks good on paper.
If ever there were a case for the swelling amounts of money and subsidies being allocated to clean- and green-energy efforts, it could be found in the example of the solar-energy laws passed in Germany in 2004.
Today, that country has 55% of the world's solar-panel installations, according to Colin O'Connor, a KBC portfolio manager.
Considering all the new tax credits for investment and production in solar energy, and grants for companies making the panels, not to mention the ample sunshine in many parts of the United States, the case can easily be made for the emergence of the United States as the world's biggest solar-energy market.
One company cited by Mr. O'Connor as a likely leader is Tempe, Ariz.-based First Solar Inc. (FSLR).
The key, he said, is to look past the $25,000 residential-solar-panel-installation expense and consider how the corporate world will benefit from the increased energy subsidies.
"Residential is an often-highlighted area of use for solar energy, but commercial scale represents the real opportunities," Mr. O'Connor said. "We think there will be a lot of growth by big solar firms in regions like Arizona."
A new Investment Insights column appears every Monday on InvestmentNews.com. E-mail Jeff Benjamin at jbenjamin@investmentnews.com.
