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
Advertisement
Christiana Wyly is only 25, but she has already determined that her life's mission is to use her investments to help preserve the planet and to persuade other young people to do likewise. Kelly Sheehan and Joshua Martin are banking on their environmentally friendly mutual funds to secure not only their retirements but also their soon-to-be firstborn child's financial and physical health. Jennifer Woodruff invests only in stocks and funds that pass environmental muster.
These four people, all young, educated and sincere, haven't gone green just because they're idealists. They're investing in environmentally friendly stocks -- either directly or through funds -- to make money. Wyly, a Los Angeles resident whose father, Sam, made a fortune in software, lives in a solar-powered house and drives a car that runs on biodiesel fuel, but she's hard-nosed about finances. "It's not either/or," she says. "You can make money at this."
RELATED LINKS | |||
 |
25 Stocks to Invest in a Cleaner World | ||
|
|
Five Green Up-And-Comers | ||
But it's one thing for a number of well-meaning individuals to glom onto a powerful investment theme that -- pardon the expression -- has the wind at its back. It's another thing to actually make good money. After all, the same kind of can't-miss thinking impoverished millions of investors who were sure that buying highflying Internet stocks was akin to minting money.
The scarcity factor
But there are also plenty of pros who believe that green investing is the next big thing. Take Christopher Peck, a financial adviser in Windsor, Cal., with the aptly named Natural Investment Services. Investing in alternative-energy stocks or specialized green funds, he says, isn't like buying shares of chip makers, telecommunications-equipment producers and Internet companies -- sectors in which product prices trend downward. Green power is a premium-priced product, and it's still relatively scarce. Venture capitalists and other large investors who are pouring money into green enterprises aren't doing it for charitable purposes, Peck says. "They have no intention of accepting inferior returns."
Two well-publicized developments underlie the growing interest in alternative energy. One is rising fuel costs. Crude-oil prices have jumped 600% since 1999, and gasoline prices have soared. As a result, filling up an SUV can cost $100 nowadays. At the same time, growing numbers of scientists and government officials now accept that emissions of greenhouse gases, such as carbon dioxide and methane, are contributing to higher global temperatures, which could have catastrophic consequences for the planet.
There are a lot of reasons to believe that investing in the environment can generate sustainable, long-term profits. They include:
Range of choices. One of the nice things about green investing is that the universe of potential investments is large and wide. Green stocks encompass a variety of sectors, company sizes and quality. Many potential investments are young, small and risky. But you can green up a portfolio with a package of proven blue chips, such as General Electric (symbol GE), Johnson Controls (JCI) and United Technologies (UTX). All three work with developers to cool, heat and light buildings more efficiently, among other things. That's important because buildings are responsible for about one-third of the world's energy consumption.
Look at United Technologies, a green double play. It has been developing more-efficient helicopters and jet engines, as well as such innovative products as gearless elevators that use half the power of traditional lifts. The industrial conglomerate has also reduced its own energy consumption by 2% a year for ten years and intends to accelerate those savings. Meanwhile, the company has boosted its earnings 14% annually since 2002. Its stock price has doubled, and so have its cash dividends.