The profile of “green’’ investors has changed.
They aren’t just mature demonstrators of the 1960s with extra cash in their accounts.
WASHINGTON — The profile of “green’’ investors has changed.
They aren’t just mature demonstrators of the 1960s with extra cash in their accounts.
Today’s environment friendly investors include hedge funds, retirement accounts and individuals who believe that the “greenest’’ firms will move to the tops of their industries. They are backing companies with sustainable busi-
ness practices because they expect that there will be an economic payoff for the companies and themselves.
As so-called green investors move toward the mainstream, financial advisers who offer eco-friendly products are finding themselves a step ahead of the market.
“It’s an area with very lucrative potential for advisers,’’ said Steve Schueth, president of Colorado Springs, Col.-based First Affirmative Financial Network LLC, which has about $616 million in client assets and specializes in environmental investing.
Most of the assets coming to First Affirmative are referred from the firm’s network of more than 100 financial professionals whose clients are looking for an environment friendly investment. The traditional adviser often doesn’t have the expertise or products to meet these clients’ investment needs, Mr. Schueth said.
Other issues
First Affirmative is one of a handful of firms in the United States that have come to specialize in green investments, following a history of providing socially responsible investments. The broader sector of socially responsible investments also incorporates issues such as human rights and corporate-governance policies into portfolio decisions.
The environment always has been an important aspect to socially conscious investors, and many surveys that attempt to rank these issues put the environment as the top concern, Mr. Schueth said.
The environment is of growing importance to clients, said investment adviser Jack Brill, who opened Natural Investment Services LLC in 1999 to specialize in values-based investing. “Environmental issues have become very strong and have given clients a lot of incentive to seek socially responsible investing.’’
The Paonia, Colo., firm has about $100 million in assets under management.
Progressive Investment Management Inc.’s clients were clamoring eight years ago for a mutual fund that specialized in environmental sustainability. So the Portland, Ore., investment manage- ment firm created one, said chairman Carsten Henningsen.
Progressive’s Portfolio 21 now has $200 million in assets and invests in companies that save natural resources and provide products, services and technologies that are needed to create a sustainable society, he said.
The Sierra Club of San Francisco also recognized a need for an environmental investment in the late 1990s, when its members began regularly asking for a good green place to invest, said Garvin Jabusch, vice president of Forward Management LLC, also of San Francisco.
In response, the environmental group developed the Sierra Club Stock Fund, which now has about $45 million invested in companies that meet the environmental criteria set by the Sierra Club. The organization and Forward also started the Sierra Club Equity Income Fund, which has about $25 million in assets under management.
Seeing further need for environmental offerings, Forward Funds created the Forward Progressive Real Estate Fund, which invests in areas with urban revitalization and projects that use sustainable materials and improve energy efficiency.
The trend for advisers offering environmental investments is being driven by an increase in client demand, advisers said.
Light Green Advisors, an asset management firm that specializes in environmental sustainability investing, has seen investors change in recent years.
“Three years ago, they were looking to be the good guy,’’ said Jonathan Naimon, managing director of the Seattle-based firm, which aims to invest in the most environmentally sound firms of different sectors. “Now they are looking for an investment response to climate change and other environmental risks.’’
Light Green Advisors, which has worked with the Sacramento-based California State Teachers’ Retirement System’s pension funds, even gets calls from hedge funds, he said.
It’s good business
Financial professionals are coming to Light Green Advisors for products, because they realize that if they don’t offer such investments, their clients are going to go around them to find some, Mr. Naimon said.
Some environmental advisory firms have taken the environmental mantra to heart. Progressive, for one, started from the inside when it decided to go green.
It has committed to using recycled paper, using green energy sources, and it buys carbon credits to offset the carbon dioxide emissions that its employees’ business trips cause, Mr. Henningsen said. That’s every flight, subway and car ride taken, he said. Carbon credits are traded through exchanges and are a method to reduce greenhouse gas emissions.
“Even mainstream firms like Goldman Sachs [& Co.] are see-
ing the potential business opportunity of global warming and
climate change risk,’’ Mr. Henningsen said, referring to the Wall Street firm’s own environmental-investing strategy laid out in November 2005.
A growing group of investors are seeing the long-term trend toward environmental awareness and are looking to benefit from investing in companies that are ecologically proactive, said Bob Veres, a Mars Hill, N.C.-based publisher of the financial planning industry newsletter Inside Information.
Green advisers are finally “getting rewarded by an evolution in the business landscape,” he said. “Their clients will probably be better served by advisers who are aware of these issues than advisers who are focused purely on the numbers.”
