A Green Lining in Market Meltdown?
Clean and green technologies may end up a big winner in the current global financial crisis, say investment professionals.
Billions of dollars in new investments have been made in clean/green tech such as renewable energy and energy efficiency in recent years. And, despite fears of a major recession in the U.S., nearly all investment professionals and institutions reported plans to introduce new investment opportunities before the end of 2009, according a new survey of the 500-member Social Investment Forum (SIF), an association for socially and environmentally responsible investment firms.
"In the last two years the growth in the green economy has been tremendous," said Jack Robinson, president of Winslow Management Company in Boston.
"But the huge win for the green economy is the U.S. bank bailout programme," Robinson, a green investment expert, told IPS.
It turns out the near collapse of the U.S. financial system has a silver lining for the long-cash-starved alternative energy sector.
In order to get the U.S. Congress to back the much-debated Emergency Economic Stabilisation Act -- the 700-billion-dollar bank bailout programme -- 150 billion dollars in popular tax provisions were shoehorned into the bill. Among them are at least 18 billion dollars in long-term funding and tax breaks for renewable energy.
When combined with state and local incentives, these tax benefits and incentives will cover half the cost of installing a full solar energy system on houses and businesses in many regions, Robinson said.
"Previously, there was no long-term government commitment to renewables. Now we have an eight-year commitment," he said.
Robinson acknowledges that in the current tight credit market it will be still be challenging for renewable energy companies to borrow money. However, the opportunities in the clean and green energy sector are immense, he maintains.
"Investors now recognise the growth opportunities that are available to companies that tackle climate change and develop clean sources of energy," he noted.
Another reason for green investor optimism is the virtual certainty that the U.S. will have a carbon cap and trade system by 2010 at the latest.
"The new Congress will regulate carbon emissions. The costs of fossil fuel will finally begin to reflect the costs of climate change," said Adam Seitchik, lead portfolio manager of Green Century Balanced Fund, and chief investment officer of Trillium Asset Management, Boston.
"Despite the credit crisis, the fundamentals of clean energy are so strong, they will find financing," Steitchik said in an interview.
Companies producing solar products have seen their revenues grow 60 to 140 percent this year and expect to reach 45 to 200 percent in 2009. One company, SunPower Corp., will see 2 billion dollars in sales in 2009, he said.
Although solidly profitable, the stock prices for these companies have plummeted just like all the others on Wall St. However that means they are terrific investment opportunities even if their earnings decline due to slowing economies and the credit crisis, he said.
Even the falling price of oil won't take the bloom off the rising green economy, experts say. Alternative energy is more cost-competitive than it once was and when combined with long-term government support incentives, oil would have to be below 50 dollars a barrel to have an impact. It should also be remembered that the oil and gas industry receives government subsidies ranging from 20 to 40 billion dollars annually.
Large institutional investors like pension funds are also worried about the risks of climate change on their investments and are shying away from putting money into the fossil fuel industry, said Seitchik. Green technologies are far more attractive, particularly over the longer term.
"Investment managers are making different choices about where to put their clients' money," Seitchik said.
And because of this fact governments have been encouraged to move in the same direction.
"As energy prices continue to fluctuate and the need to address climate change becomes ever more urgent, many investors want to blaze a trail for clean energy solutions that meet demand and respond to the impacts of climate change," said Lisa Woll, chief executive officer of the Washington, D.C.-based SIF.
"Our new survey confirms that Social Investment Forum members are at the forefront of 'green technology' and clean energy investing, which is rapidly becoming a major element of the mainstream American investment marketplace."