December 29, 2008 - 1:24PM
AdvertisementPrices for Australia's most valuable export commodities including iron ore and copper are expected to tumble next year as demand for the metals contracts in line with slowing global economic growth.
Analysts unanimously agree commodities demand and prices will remain weak in the first half of 2009 - prompting further mine closures and sector consolidation - as the world-wide financial crisis continues.
But the strength of the resources sector, which is inextricably tied to China's growth, could be bolstered later in the year if the Asian superpower's 4 trillion yuan ($853.9 billion) economic stimulus package kicks in, some analysts say.
"Metals markets, which tend to preempt recoveries in the order of three to six months, may start to price better from June, with the idea that demand conditions will improve in 2010," ANZ Bank head of commodity research Mark Pervan says.
"By the end of mid next year, the US dollar will not get much stronger, which may trigger some more buying into commodities."
Most analysts agree that global economic growth will improve in 2010, supporting demand for metals and energy once again.
China's appetite for base metals such as iron, nickel, lead and zinc was insatiable in 2007 amid one of history's most rapid urbanisations but sharply deteriorated in 2008 as its economic growth slowed.
The Reuters/Jeffries CRB Index of 19 materials was down more than 50% in December from a record high in July, reflecting dramatically reduced demand for commodities.
GFMS Metals Consulting says sentiment towards base metal demand is now bearish worldwide due to sharply lower carbon and stainless steel production.
Steel demand has slumped after a dramatic slowdown in construction in China following the Beijing Olympics and more recently, a downturn in the automotive industry.
"The 'buyers strike' for industrial metals continues," GFMS says.
"This reflects a combination of the credit crunch, the economic downturn and de-stocking in anticipation of even lower prices further down the line."
Metals fall
Since July, nickel and zinc prices have fallen 60% and 55% respectively, followed by copper with a 52% fall.
Mr Pervan says the copper price is likely to fall further but could rebound, along with nickel and zinc, towards the end of 2009.
Reduced supply of these metals following many mine closures this year has not been reflected in prices, so there is room for improvement, he says.
Markets for these metals were "vulnerable to a supply squeeze when conditions improve", Mr Pervan warned.
As for iron ore, the benchmark price is expected to drop between 10 and 50% in 2009 as Chinese steel mills play hardball to mitigate the almost 100% price hike negotiated this year by mining giants BHP Billiton Ltd and Rio Tinto Ltd.
Even the most bullish iron ore miners and explorers believe the large price rises of recent years cannot continue.
Mr Pervan concurred with a forecast by broker Morgan Stanley that iron ore prices could fall by up to 50% in the next three to six months amid pressure from low-margin Chinese steel mills seeking to lower their input costs.
Most analysts say the benchmark iron ore price will drop 30%.
"The iron ore market looks particularly vulnerable because it's so heavily leveraged to China," Mr Pervan says.
"The risk is on the downside as further steel production cuts come through."
However, Chairman of iron ore explorer Centrex Metals Ltd, David Lindh, says many Chinese steel mills have returned to full production.
This view is supported by China's largest iron ore importer and trader, Sinosteel Corp, which said in December the market for the steel-making input was recovering and it wanted to accelerate shipments from Australia.
The spot iron ore price has dropped by about 30% in the past six months, falling below the $US100 per tonne benchmark price, as stockpiles grew after steel mills deferred and cancelled shipments.
Atlas Iron Ltd Managing Director David Flanagan says the gap between spot and benchmark prices is closing, a sign that the ferrous metals market is starting to rebound.
This is because interest from large international groups in Australian iron ore remains strong.
Many Chinese steel mills took high equity positions in Australian iron ore miners and explorers as their shares languished in 2008.
Positioning themselves for China's upturn, these mills began signing offtake deals again in December to secure future supply of the bulk commodity.
Stockbroker Hartley's says Wuhan Iron & Steel's $190 million recent investment in Centrex "bodes well" for other Australian iron ore projects.
"The deal indicates that Chinese steel mills are still willing to do deals and have a long term view on the sector, and are still looking to secure offtake," the broker says.
Gold outlook less clear
The gold price hit a record $US1,011.25 an ounce in March but fell to $US712.50 an ounce in October - despite the precious metal's traditional role as safe-haven investment in troubled times.
Resources specialist Peter Arden, of stock broker Ord Minnett, says gold was largely ignored as investors flocked to the weak - thus affordable - US dollar.
"It was pure panic - people didn't trust commodities anymore," Mr Arden said.
China, which usually buys a lot of gold, played a large role in diverting funds to US dollars, perhaps to prop up earlier investments in US bonds, he said.
Mr Arden says global economic stimulus packages could support a return to gold investment, tipping gold price to approach $US1,000 an ounce by the end of 2009 or in early 2010.
Morgan Stanley estimates the yellow metal will average $US950 an ounce in 2009, while the Australian Bureau of Agricultural and Resource Economics (ABARE) has flagged $US810 an ounce.
Few new gold mines have started up and some have closed, so supply is expected to remain tight.
The oil price was extremely volatile in 2008, peaking at $US147.27 per barrel in July then falling about 74% to $US38 per barrel in December - a four-and-a-half-year low.
The dip was the first since 1983, according to the International Energy Agency (IEA), which predicts oil demand in 2009 will be 86.3 million barrels a day, up from 85.8 million barrels a day in 2008.
Oil to settle
AMP Capital Investors head of investment strategy and chief economist, Shane Oliver, says falling oil prices were one of the signs that the global economic recovery was falling into place.
Broker Merrill Lynch said the most likely average oil price in 2009 was $US50 a barrel, while ABARE said it should average $US59 a barrel.
The Organisation of Petroleum Exporting Countries, which represents nations producing about 36% of the world's oil, cut output by a record a 2.2 million barrels a day - or 7% - in December in a bid to increase the oil price.
However, market analyst Savanth Sebastian, of broker CommSec, says OPEC member nations will not necessarily comply with the directive.
Non-OPEC output will rise very slightly in 2009, the IEA said.
Mr Pervan sais a supply response from Russia could be the "wildcard."
"However, the weight of negative economic news, importantly out of China, is likely to keep any recovery short."
New York-based independent energy analyst, Bernie Picchi, says there is a slim chance the crude oil price could drop to $US30 per barrel for a short time, but the long-term outlook was $US60 to $US80 a barrel.
Futurist Dr Paul Higgins forecasts a narrower range of $US35 to $US60 a barrel.
He says a change in vehicle-buying habits in the US - which uses one-third of the world's oil - helped cut demand.
But Mr Picchi says the world has been slow to wean itself off oil and other fossil fuels.
He says the current cyclical retreat in oil prices could provide a "breather" for many years that will give industrialised countries time to examine and implement energy efficiency and production policies.
This was much needed, "because when energy demand growth resumes, the next oil crisis could be more severe than the current one".
NEWS - Commodites, Agriculture, Green Investment - NEWS
12/27/2008
Alternative energy bulls face bear market
By Steve Gelsi, MarketWatch
Last update: 1:45 p.m. EST Nov. 18, 2008Comments: 12NEW YORK (MarketWatch) - While some hail the election of President Barack Obama as a boon for alternative energy down the road, the renewable sector remains stalled compared to the flurry of deal making earlier this year.
Although legislators in Washington are laying out an ambitious energy agenda for the coming year, the credit crises and cheap gasoline have dealt a double-blow to the prospects for biofuel, solar and wind energy champions.
No less than five initial public offerings, as well as an undetermined number of financings and mergers, remain frozen in the ice of the 2008 credit crises as the bear market pierces the alternative energy bubble.
In a telling sign of the times, the most recent renewable energy IPO from profitable solar cell manufacturer GT Solar now trades at $2.59 a share, after debuting at $16.50 a share on July 24.
"It's highly unlikely that we'll see any alternative energy IPOs right now, with the price of oil coming down dramatically and the last alternative energy IPO, GT Solar, being an exceptionally poor IPO," said Scott Sweet of IPO Boutique.
The current dry spell came despite the optimism around the sector earlier this year, when deal makers touting renewable deals argued the future looked bright even without record oil prices because of rising concern over global warming, the prospects for lucrative carbon emissions trading and the growing call for energy independence.
It turns out that the bear market, the credit crises, not to mention gasoline at $2 a gallon again, would take their toll just as they did in the old gasohol days of the 1970s, when rooftop solar panels and gas-sipping cars soon gave way to big trucks and central air conditioning systems on the back of cheaper oil.
Now, the biofuel sector - which saw a series of initial public offering as well as mergers in the past two years -- remains under stress with the largest publicly held player, VeraSun, filing for Chapter 11 bankruptcy as it lost money betting the wrong way on corn prices. Margins in the business are also being squeezed by lower gasoline prices. See full story.
Meanwhile, solar stocks such as First Solar (FSLR:first solar inc com
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General Electric (GE:General Electric Company
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GE 15.97, -0.14, -0.9%) spokesman Andy Katell of GE Energy Financial Services, said the pace of deal making and financing has definitely slowed down in the wind sector, partly because tax advantages of the Production Tax Credit are more difficult to tap into.
"The production tax credit was only extended by Congress for one year, and that's not long enough for long-term planning of new projects," he said. "At the same time, some of the bankers who used to set up the tax financing deals are no longer around, with Lehman Brothers and Bear Stearns now out of business."
GE continues to invest in alternative energy, such as a move to invest $30 million in lithium ion battery maker A123, which has also filed an initial public offering. The move marked GE's sixth investment in the company.
Support builds for legislation, but it will take time
Still, despite the setbacks, policy makers and some on Wall Street argue the world's need for energy continues to grow along with population, and the need to fight global warming remains a priority,
Lazard Capital Markets Analyst Sanjay Shrestha said this week that macroeconomic factors continue to depress stock prices in the alternative energy sector, but the future looks brighter than now.
"We believe Barack Obama's election is a long-term positive for the alternative energy group," Shrestha said. "Until the financial markets show signs of stability, the economy will likely continue to overshadow other policy agenda items. However, we believe energy and the focus on alternative sources is a top agenda item that Obama will address in his first months in office."
Obama has pledged $150 billion in spending over the next 10 years and to make renewable tax credits permanent. He also supports federal Renewable Portfolio Standard by 2012, increasing to 25% by 2020, he said.
Support appears to be relatively strong from Congress, as Sen. Jeff Bingaman, chairman of the committee on energy and natural resources, laid out a lengthy energy agenda in a speech on Monday.
Bingaman said he'll support renewable electricity standards, improvements to the power grid, a single cap and trade system to reduce carbon emissions, and greater fuel efficiency for automobiles, among other measures.
"Next year, I hope we can work in a bipartisan way to formulate the strongest renewable electricity standard that we can pass through the Congress," he said. "In addition to more renewable generation, we need to implement a smart and robust national transmission grid."
While any major legislation is likely months away, the current recessionary atmosphere has proven too toxic for at least five initial public offerings in registration:
STR Holdings (Proposed symbol: PVS) operates in two segments: solar module encapsulants and consumer products quality assurance services
GCL Silicon Technology (Proposed symbol: GCL) A supplier of polysilicon and wafers to companies operating in the solar industry.
A123 Systems (Proposed symbol: AONE)
Provides rechargeable lithium-ion batteries and battery systems.
First Wind Holdings (Proposed symbol: WNDY)
Develops, owns and operates a portfolio of wind energy projects
Noble Environmental (Proposed symbol: NEPI)
A wind energy company operating 282 megawatts of electrical generating capacity
Steve Gelsi is a reporter for MarketWatch in New York.
Last update: 1:45 p.m. EST Nov. 18, 2008Comments: 12NEW YORK (MarketWatch) - While some hail the election of President Barack Obama as a boon for alternative energy down the road, the renewable sector remains stalled compared to the flurry of deal making earlier this year.
Although legislators in Washington are laying out an ambitious energy agenda for the coming year, the credit crises and cheap gasoline have dealt a double-blow to the prospects for biofuel, solar and wind energy champions.
No less than five initial public offerings, as well as an undetermined number of financings and mergers, remain frozen in the ice of the 2008 credit crises as the bear market pierces the alternative energy bubble.
In a telling sign of the times, the most recent renewable energy IPO from profitable solar cell manufacturer GT Solar now trades at $2.59 a share, after debuting at $16.50 a share on July 24.
"It's highly unlikely that we'll see any alternative energy IPOs right now, with the price of oil coming down dramatically and the last alternative energy IPO, GT Solar, being an exceptionally poor IPO," said Scott Sweet of IPO Boutique.
The current dry spell came despite the optimism around the sector earlier this year, when deal makers touting renewable deals argued the future looked bright even without record oil prices because of rising concern over global warming, the prospects for lucrative carbon emissions trading and the growing call for energy independence.
It turns out that the bear market, the credit crises, not to mention gasoline at $2 a gallon again, would take their toll just as they did in the old gasohol days of the 1970s, when rooftop solar panels and gas-sipping cars soon gave way to big trucks and central air conditioning systems on the back of cheaper oil.
Now, the biofuel sector - which saw a series of initial public offering as well as mergers in the past two years -- remains under stress with the largest publicly held player, VeraSun, filing for Chapter 11 bankruptcy as it lost money betting the wrong way on corn prices. Margins in the business are also being squeezed by lower gasoline prices. See full story.
Meanwhile, solar stocks such as First Solar (FSLR:first solar inc com
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SPWRA 35.38, +1.07, +3.1%) may face the possibility of oversupply as cash-strapped governments overseas cut back on tax subsidies. See full story.
General Electric (GE:General Electric Company
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GE 15.97, -0.14, -0.9%) spokesman Andy Katell of GE Energy Financial Services, said the pace of deal making and financing has definitely slowed down in the wind sector, partly because tax advantages of the Production Tax Credit are more difficult to tap into.
"The production tax credit was only extended by Congress for one year, and that's not long enough for long-term planning of new projects," he said. "At the same time, some of the bankers who used to set up the tax financing deals are no longer around, with Lehman Brothers and Bear Stearns now out of business."
GE continues to invest in alternative energy, such as a move to invest $30 million in lithium ion battery maker A123, which has also filed an initial public offering. The move marked GE's sixth investment in the company.
Support builds for legislation, but it will take time
Still, despite the setbacks, policy makers and some on Wall Street argue the world's need for energy continues to grow along with population, and the need to fight global warming remains a priority,
Lazard Capital Markets Analyst Sanjay Shrestha said this week that macroeconomic factors continue to depress stock prices in the alternative energy sector, but the future looks brighter than now.
"We believe Barack Obama's election is a long-term positive for the alternative energy group," Shrestha said. "Until the financial markets show signs of stability, the economy will likely continue to overshadow other policy agenda items. However, we believe energy and the focus on alternative sources is a top agenda item that Obama will address in his first months in office."
Obama has pledged $150 billion in spending over the next 10 years and to make renewable tax credits permanent. He also supports federal Renewable Portfolio Standard by 2012, increasing to 25% by 2020, he said.
Support appears to be relatively strong from Congress, as Sen. Jeff Bingaman, chairman of the committee on energy and natural resources, laid out a lengthy energy agenda in a speech on Monday.
Bingaman said he'll support renewable electricity standards, improvements to the power grid, a single cap and trade system to reduce carbon emissions, and greater fuel efficiency for automobiles, among other measures.
"Next year, I hope we can work in a bipartisan way to formulate the strongest renewable electricity standard that we can pass through the Congress," he said. "In addition to more renewable generation, we need to implement a smart and robust national transmission grid."
While any major legislation is likely months away, the current recessionary atmosphere has proven too toxic for at least five initial public offerings in registration:
STR Holdings (Proposed symbol: PVS) operates in two segments: solar module encapsulants and consumer products quality assurance services
GCL Silicon Technology (Proposed symbol: GCL) A supplier of polysilicon and wafers to companies operating in the solar industry.
A123 Systems (Proposed symbol: AONE)
Provides rechargeable lithium-ion batteries and battery systems.
First Wind Holdings (Proposed symbol: WNDY)
Develops, owns and operates a portfolio of wind energy projects
Noble Environmental (Proposed symbol: NEPI)
A wind energy company operating 282 megawatts of electrical generating capacity
Steve Gelsi is a reporter for MarketWatch in New York.
Carbon funds grow in '08 but slowed by uncertainty
Reuters - Thu Aug 21, 2008 3:25am EDT
LONDON (Reuters) - The global carbon fund market, which invests in emissions offset credits from clean energy projects in developing countries, has risen by 63 percent to nearly $13 billion so far in 2008, environmental market analysts said on Thursday.
Although strong, the carbon fund market's growth was outpaced by the overall carbon emissions market which, according to the World Bank, more than doubled between 2006 and 2007 to $64 billion, Environmental Finance magazine said in its 2008/09 Carbon Funds Directory.
"Looming uncertainty over the shape of the global carbon markets after 2012 (and) the effects of the credit crunch ... are contributing to a slowing down of new capital joining the carbon market," Environmental Finance said in a statement.
The global carbon markets are poised to double in value again to more than $100 billion in 2008, according to market observers.
Mark Nicholls, editor at Environmental Finance, added "In most other asset classes, 63 percent growth in assets under management would be a pretty good story, but the 100 percent-plus growth in carbon markets between 2006 and 2007 has outpaced growth in carbon funds."
The number of carbon funds has grown by 33 percent so far in 2008, up from 56 funds managing $7.9 billion in assets in 2007, Environmental Finance said.
There are now 80 carbon funds under management globally, including private funds, government-run credit purchase vehicles or buyers' pools. Most buy only the offset credits issued under the Kyoto Protocol's Clean Development Mechanism (CDM) to clean-energy projects like wind farms and hydro dams in developing countries.
The funds then sell these credits for profit to companies and governments from rich nations which use them to meet emissions targets. Government-run credit purchase vehicles buy offset credits to help meet national greenhouse gas obligations under the Kyoto Protocol.
The largest corporate-run carbon funds by capital secured, as identified by Environmental Finance, include Climate Change Capital's Carbon Fund ($1 billion in assets), the Greenhouse Gas-Credit Aggregation Pool (managed by Natsource, $825.8 million in assets), the China Methane Recovery Fund (managed by MTM Capital Partners, $635.3 million in assets) and Trading Emissions' carbon fund ($619.7 million in assets).
The largest non-corporate funds or government-run credit purchase vehicles include the Umbrella Carbon Facility (managed by the World Bank, $1.23 billion in assets), the Norwegian Carbon Tender (managed by the Norwegian government, $800 million in assets) and the Kyoto Mechanism Credit Acquisition Programme (managed by the Japanese government, $761.9 million in assets).
The entire CDM market also doubled to $13 billion in 2007, the World Bank said.
SLOWER GROWTH
While the global credit crunch is squeezing the availability of the capital required for higher growth in carbon funds, worries surrounding ongoing negotiations to strike a new agreement to succeed the Kyoto Protocol are also casting uncertainty over the future of the global carbon markets.
With the Kyoto Protocol's first commitment period expiring after 2012, the fate of the CDM is at risk. This is leading to a slowdown in the number of projects being submitted for registration by the U.N.'s climate change secretariat, and this may affect the long-term supply of offset credits relied on by the carbon funds market.
As a result, shares in CDM project developers like UK-based EcoSecurities have plummeted in the past year.
Market participants are also watching the upcoming U.S. presidential election, which should shed light on the direction the heaviest-polluting developed nation will take on emissions trading, Environmental Finance said.
Both presidential candidates have said they are in favor of introducing so-called cap-and-trade schemes, a prerequisite for the emergence of a national carbon emissions market.
"The entry of the U.S. (into the global carbon markets) will be game-changing and, while a successor to Kyoto is going to be tough to negotiate, pressure is building on the international community to act decisively on climate change," Nicholls said.
For additional news and analysis on the carbon markets, go to communities.thomsonreuters.com
(Reporting by Michael Szabo, editing by Matthew Lewis)
LONDON (Reuters) - The global carbon fund market, which invests in emissions offset credits from clean energy projects in developing countries, has risen by 63 percent to nearly $13 billion so far in 2008, environmental market analysts said on Thursday.
Although strong, the carbon fund market's growth was outpaced by the overall carbon emissions market which, according to the World Bank, more than doubled between 2006 and 2007 to $64 billion, Environmental Finance magazine said in its 2008/09 Carbon Funds Directory.
"Looming uncertainty over the shape of the global carbon markets after 2012 (and) the effects of the credit crunch ... are contributing to a slowing down of new capital joining the carbon market," Environmental Finance said in a statement.
The global carbon markets are poised to double in value again to more than $100 billion in 2008, according to market observers.
Mark Nicholls, editor at Environmental Finance, added "In most other asset classes, 63 percent growth in assets under management would be a pretty good story, but the 100 percent-plus growth in carbon markets between 2006 and 2007 has outpaced growth in carbon funds."
The number of carbon funds has grown by 33 percent so far in 2008, up from 56 funds managing $7.9 billion in assets in 2007, Environmental Finance said.
There are now 80 carbon funds under management globally, including private funds, government-run credit purchase vehicles or buyers' pools. Most buy only the offset credits issued under the Kyoto Protocol's Clean Development Mechanism (CDM) to clean-energy projects like wind farms and hydro dams in developing countries.
The funds then sell these credits for profit to companies and governments from rich nations which use them to meet emissions targets. Government-run credit purchase vehicles buy offset credits to help meet national greenhouse gas obligations under the Kyoto Protocol.
The largest corporate-run carbon funds by capital secured, as identified by Environmental Finance, include Climate Change Capital's Carbon Fund ($1 billion in assets), the Greenhouse Gas-Credit Aggregation Pool (managed by Natsource, $825.8 million in assets), the China Methane Recovery Fund (managed by MTM Capital Partners, $635.3 million in assets) and Trading Emissions' carbon fund ($619.7 million in assets).
The largest non-corporate funds or government-run credit purchase vehicles include the Umbrella Carbon Facility (managed by the World Bank, $1.23 billion in assets), the Norwegian Carbon Tender (managed by the Norwegian government, $800 million in assets) and the Kyoto Mechanism Credit Acquisition Programme (managed by the Japanese government, $761.9 million in assets).
The entire CDM market also doubled to $13 billion in 2007, the World Bank said.
SLOWER GROWTH
While the global credit crunch is squeezing the availability of the capital required for higher growth in carbon funds, worries surrounding ongoing negotiations to strike a new agreement to succeed the Kyoto Protocol are also casting uncertainty over the future of the global carbon markets.
With the Kyoto Protocol's first commitment period expiring after 2012, the fate of the CDM is at risk. This is leading to a slowdown in the number of projects being submitted for registration by the U.N.'s climate change secretariat, and this may affect the long-term supply of offset credits relied on by the carbon funds market.
As a result, shares in CDM project developers like UK-based EcoSecurities have plummeted in the past year.
Market participants are also watching the upcoming U.S. presidential election, which should shed light on the direction the heaviest-polluting developed nation will take on emissions trading, Environmental Finance said.
Both presidential candidates have said they are in favor of introducing so-called cap-and-trade schemes, a prerequisite for the emergence of a national carbon emissions market.
"The entry of the U.S. (into the global carbon markets) will be game-changing and, while a successor to Kyoto is going to be tough to negotiate, pressure is building on the international community to act decisively on climate change," Nicholls said.
For additional news and analysis on the carbon markets, go to communities.thomsonreuters.com
(Reporting by Michael Szabo, editing by Matthew Lewis)
Ermitage launches Clean Resources fund of hedge funds and opens New York office
Hedgeweek - Sun, 15 Jun 2008
Alternative multi-manager Ermitage Group, which runs USD2.8bn in assets, has launched a niche fund of hedge funds to capitalise on the growing interest and public awareness surrounding environmental issues and climate change. The firm has also established a presence in New York alongside its existing offices in Jersey and London.
A sister fund to Ermitage's established Resources Fund, the Clean Resources Fund has been launched with an initial USD20m investment. It aims to provide investors with access to a concentrated portfolio of managers exploiting opportunities within the alternative energy sector, including resource and energy efficiency, energy technology, clean power generation, greenhouse gas management, and water and waste management.
'Ermitage's Clean Resources Fund is the latest in a series of high performance targeting fund of funds, specifically created to capitalise on strong and long term market opportunities,' says chief investment officer Jonathan Wauton. 'This fund has the additional benefit of investing within a market sector with a strong ethical appeal.'
An equity-centric product, the fund will target returns of between 16 and 20 per cent during bull market conditions and aims to protect assets during bear markets, and its risk budget will be similar to traditional equity markets. The fund's equity exposure allows investors to access clean resource investment opportunities that are not typically accessible to conventional commodity indices, for example in the renewable energy sector.
It has been built using Ermitage's portfolio construction system, known as Optics, which is designed to maximise the value of the firm's hedge fund research, macroeconomic and risk analysis in order to deliver consistent risk-adjusted performance.
Awareness and media coverage of potential opportunities in the clean resources field has grown steadily over recent months, Ermitage says, fuelled by record commodity and energy prices. Against a backdrop of increased government interest and legislation worldwide, clean resources sub-sectors such as renewable energy, water and environmental resource management have become firmly established investment themes.
The Clean Resources Fund aims to generate attractive risk-adjusted returns from leading managers while delivering diversification of risk across global markets, sectors, styles and themes.
The fund is available in US dollar, sterling and euro currency classes, with a minimum initial investment of EUR125,000 or the dollar or sterling equivalent. The annual management fee is 1.5 per cent and there is a 10 per cent performance fee with high watermark. Subscription is monthly with 90 calendar days' notice required for redemptions.
'The clean resources theme has been a sub-strategy within our Resources Fund for almost two years and our decision to create a pure play clean resources product reflects our view of the opportunities that exist in this emerging space,' Wauton says. 'The fund will offer investors the potential for highly attractive risk-adjusted returns with the multi-manager approach aiming to mitigate adverse sector, technology and manager risk.
'This is a rapidly evolving sector, and by focusing on best of breed asset managers, the fund will seek to be aligned with the latest developments, including global climate change policies and technologies. With the number of new strategies and fund launches in this sector, we expect the overall outlook for the fund to be extremely positive.'
Ermitage's New York office will perform hedge fund manager research and service the firm's North American clients. The firm says its opening is a cornerstone of its strategic development plans, which focuses strongly on servicing the needs of North American pension funds and endowments, and builds on Ermitage's appointment in 2006 to run a European fund of hedge funds mandate by one of the largest US pension funds.
The new operation, Ermitage Americas, will be staffed by strategy specialists and client service professionals relocating from the UK and recruited in the North American marketplace.
'Ermitage's ability to provide institutions with sophisticated solutions has naturally led us to open a North American office, enabling us to provide an innovative service for pension plan sponsors, endowments and foundations,' says the group's chief executive Ian Cadby. 'Our knowledge and track record within the European hedge fund space remains one of the main attractions to American institutions.
'However, this has been complemented in the last year by Ermitage's Optics customised portfolio system, which has been built to deliver institutional portfolios capable of consistent risk-adjusted performance, maximising the value of the firm's hedge fund research, macroeconomic and risk analysis. We believe our ability to build individual portfolios via a robust 'glass box' process will be the foundation of our client service in North America.'
Ermitage Group was acquired by its management and investment trust Caledonia Investments from South Africa's Liberty Group in March 2006. A provider of alternative investment services to institutions, pension funds and private clients, the group made its first hedge fund investment in 1984. In addition to funds of hedge funds, managed accounts and customised solutions for individualised mandates, it also provides a private client services through its global wealth management services division.
Alternative multi-manager Ermitage Group, which runs USD2.8bn in assets, has launched a niche fund of hedge funds to capitalise on the growing interest and public awareness surrounding environmental issues and climate change. The firm has also established a presence in New York alongside its existing offices in Jersey and London.
A sister fund to Ermitage's established Resources Fund, the Clean Resources Fund has been launched with an initial USD20m investment. It aims to provide investors with access to a concentrated portfolio of managers exploiting opportunities within the alternative energy sector, including resource and energy efficiency, energy technology, clean power generation, greenhouse gas management, and water and waste management.
'Ermitage's Clean Resources Fund is the latest in a series of high performance targeting fund of funds, specifically created to capitalise on strong and long term market opportunities,' says chief investment officer Jonathan Wauton. 'This fund has the additional benefit of investing within a market sector with a strong ethical appeal.'
An equity-centric product, the fund will target returns of between 16 and 20 per cent during bull market conditions and aims to protect assets during bear markets, and its risk budget will be similar to traditional equity markets. The fund's equity exposure allows investors to access clean resource investment opportunities that are not typically accessible to conventional commodity indices, for example in the renewable energy sector.
It has been built using Ermitage's portfolio construction system, known as Optics, which is designed to maximise the value of the firm's hedge fund research, macroeconomic and risk analysis in order to deliver consistent risk-adjusted performance.
Awareness and media coverage of potential opportunities in the clean resources field has grown steadily over recent months, Ermitage says, fuelled by record commodity and energy prices. Against a backdrop of increased government interest and legislation worldwide, clean resources sub-sectors such as renewable energy, water and environmental resource management have become firmly established investment themes.
The Clean Resources Fund aims to generate attractive risk-adjusted returns from leading managers while delivering diversification of risk across global markets, sectors, styles and themes.
The fund is available in US dollar, sterling and euro currency classes, with a minimum initial investment of EUR125,000 or the dollar or sterling equivalent. The annual management fee is 1.5 per cent and there is a 10 per cent performance fee with high watermark. Subscription is monthly with 90 calendar days' notice required for redemptions.
'The clean resources theme has been a sub-strategy within our Resources Fund for almost two years and our decision to create a pure play clean resources product reflects our view of the opportunities that exist in this emerging space,' Wauton says. 'The fund will offer investors the potential for highly attractive risk-adjusted returns with the multi-manager approach aiming to mitigate adverse sector, technology and manager risk.
'This is a rapidly evolving sector, and by focusing on best of breed asset managers, the fund will seek to be aligned with the latest developments, including global climate change policies and technologies. With the number of new strategies and fund launches in this sector, we expect the overall outlook for the fund to be extremely positive.'
Ermitage's New York office will perform hedge fund manager research and service the firm's North American clients. The firm says its opening is a cornerstone of its strategic development plans, which focuses strongly on servicing the needs of North American pension funds and endowments, and builds on Ermitage's appointment in 2006 to run a European fund of hedge funds mandate by one of the largest US pension funds.
The new operation, Ermitage Americas, will be staffed by strategy specialists and client service professionals relocating from the UK and recruited in the North American marketplace.
'Ermitage's ability to provide institutions with sophisticated solutions has naturally led us to open a North American office, enabling us to provide an innovative service for pension plan sponsors, endowments and foundations,' says the group's chief executive Ian Cadby. 'Our knowledge and track record within the European hedge fund space remains one of the main attractions to American institutions.
'However, this has been complemented in the last year by Ermitage's Optics customised portfolio system, which has been built to deliver institutional portfolios capable of consistent risk-adjusted performance, maximising the value of the firm's hedge fund research, macroeconomic and risk analysis. We believe our ability to build individual portfolios via a robust 'glass box' process will be the foundation of our client service in North America.'
Ermitage Group was acquired by its management and investment trust Caledonia Investments from South Africa's Liberty Group in March 2006. A provider of alternative investment services to institutions, pension funds and private clients, the group made its first hedge fund investment in 1984. In addition to funds of hedge funds, managed accounts and customised solutions for individualised mandates, it also provides a private client services through its global wealth management services division.
RMF Launches Global Environmental Fund of Hedge Funds
Friday, September 7, 2007 : Permalink
West Palm Beach (HedgeCo.Net)- Swiss-based RMF Investment Management has has announced the launch of a global fund of hedge funds that will invest purely in environmental industries and strategies.
The RMF Environmental Opportunities Fund, which the company said is the first of its kind in the world, will invest in environmentally-friendly technology, renewable energy, initiatives to reduce carbon emissions and conserve water and sustainable infrastructure.
The fund, in which RMF has invested $25.1 million, is aimed at institutional investors and designed to generate returns of between 8 and 10 per cent with medium-level volatility. As a hedge of hedge funds, it includes investments in multiple hedge fund managers, thereby increasing diversification.
RMF head of new alternative investments Michelle McClosky said that environmental investments are evolving rapidly.
“Environmental hedge funds offer great potential, but the challenge for us initially was to find enough liquid strategies with institutional-quality managers. When we started looking at the market just over a year ago, only a handful of these hedge funds existed. But over the past year, liquidity in both the equities and futures markets has increased dramatically and we have seen a corresponding increase in the number of fund offerings in the sector. With over 35 hedge funds to choose from, we are now confident the market is scalable and that managers are here to stay.
RMF, which is headquartered in Pfäffikon in Switzerland and has offices in London, New York, Singapore and the Bahamas, began as a hedge fund manager in 1992 and now manages more than $25.4 billion in assets, mainly for institutional investors.
RMF is part of Man Investments, which has $67 billion in assets under management, centers in London and Pfaƒfikon and offices in Chicago, Hong Kong, Dubai, Montevideo, Nassau, New York, Singapore, Sydney, Tokyo and Toronto.
Alex Akesson
Editor for HedgeCo.Net
Email: alex@hedgeco.net
West Palm Beach (HedgeCo.Net)- Swiss-based RMF Investment Management has has announced the launch of a global fund of hedge funds that will invest purely in environmental industries and strategies.
The RMF Environmental Opportunities Fund, which the company said is the first of its kind in the world, will invest in environmentally-friendly technology, renewable energy, initiatives to reduce carbon emissions and conserve water and sustainable infrastructure.
The fund, in which RMF has invested $25.1 million, is aimed at institutional investors and designed to generate returns of between 8 and 10 per cent with medium-level volatility. As a hedge of hedge funds, it includes investments in multiple hedge fund managers, thereby increasing diversification.
RMF head of new alternative investments Michelle McClosky said that environmental investments are evolving rapidly.
“Environmental hedge funds offer great potential, but the challenge for us initially was to find enough liquid strategies with institutional-quality managers. When we started looking at the market just over a year ago, only a handful of these hedge funds existed. But over the past year, liquidity in both the equities and futures markets has increased dramatically and we have seen a corresponding increase in the number of fund offerings in the sector. With over 35 hedge funds to choose from, we are now confident the market is scalable and that managers are here to stay.
RMF, which is headquartered in Pfäffikon in Switzerland and has offices in London, New York, Singapore and the Bahamas, began as a hedge fund manager in 1992 and now manages more than $25.4 billion in assets, mainly for institutional investors.
RMF is part of Man Investments, which has $67 billion in assets under management, centers in London and Pfaƒfikon and offices in Chicago, Hong Kong, Dubai, Montevideo, Nassau, New York, Singapore, Sydney, Tokyo and Toronto.
Alex Akesson
Editor for HedgeCo.Net
Email: alex@hedgeco.net
Kenmar to Create SRI Hedge Fund of Funds
By GreenBiz Staff
April 30, 2007
Kenmar recently announced that it will be launching a new SRI hedge fund of funds, the Kenmar Global ECO Fund SPC Limited, which will be available to investors July 1. Kenmar hopes to tap into the growing interest of investors in environmental, social, and corporate governance issues while also achieving its goal of capital appreciation.
A hedge fund of funds is a hedge fund that creates a portfolio from other hedge funds instead of investing directly in stocks or bonds. These "meta-funds" can be more diversified than other funds. However, hedge funds of funds often charge a higher fee than regular mutual funds, as they must make up for the expense fees charged by the portfolio funds.
Jerome de Bontin, President and CEO of Sustainability Investments LLC and Mekar Financial Services worked with Kenmar as an outside sustainability adviser in the make up of the Kenmar Eco Fund. SILLC will also take an active role in the distribution of the fund.
“A fund of funds can select asset management companies that are totally dedicated to a given market sector,” de Bontin said. “For instance, renewal energy covers many different industries such as wind, solar and fuel cells. The fund of funds will select experts in the industries that are economically promising while staying out of the least profitable ones.”
“Managing portfolios within the framework of social and environmental sustainability is quickly becoming a distinct driver of economic success in the near term while simultaneously promoting important longer-term global ecological and societal goals, ” Moros added.
Certain tax-exempt U.S. and non-U.S. investors can invest in Kenmar's funds, with a number of limitations. Kenmar is primarily targeting institutional investors with a minimum investment of $5 million.
“Global Eco Fund brings a new dimension to SRI and ESG investing,” de Bontin said. “It brings together the best traditional long-only asset managers with the best commodity hedge funds. Investments in commodities and raw materials are an integral part of the SRI and ESG movements, but are difficult to access via traditional mutual funds. Kenmar Eco Fund facilitates such investments.”
Kenmar's eight-member Investment Committee, co-chaired by co-CIOs Marc Goodman and Ken Shewer, make investment decisions for this and all of the Kenmar funds, based on the recommendations of the Research & Risk Management Group.
Kenmar Global ECO Fund joins a small, but growing number of funds of funds available to SRI investors. The Good Steward Fund and Gabelli Asset Management Company are two hedge funds of funds that follow Catholic values. Winslow Management Company has an environmental hedge fund, while Green Cay Asset Management has four SRI hedge funds.
April 30, 2007
Kenmar recently announced that it will be launching a new SRI hedge fund of funds, the Kenmar Global ECO Fund SPC Limited, which will be available to investors July 1. Kenmar hopes to tap into the growing interest of investors in environmental, social, and corporate governance issues while also achieving its goal of capital appreciation.
A hedge fund of funds is a hedge fund that creates a portfolio from other hedge funds instead of investing directly in stocks or bonds. These "meta-funds" can be more diversified than other funds. However, hedge funds of funds often charge a higher fee than regular mutual funds, as they must make up for the expense fees charged by the portfolio funds.
Jerome de Bontin, President and CEO of Sustainability Investments LLC and Mekar Financial Services worked with Kenmar as an outside sustainability adviser in the make up of the Kenmar Eco Fund. SILLC will also take an active role in the distribution of the fund.
“A fund of funds can select asset management companies that are totally dedicated to a given market sector,” de Bontin said. “For instance, renewal energy covers many different industries such as wind, solar and fuel cells. The fund of funds will select experts in the industries that are economically promising while staying out of the least profitable ones.”
“Managing portfolios within the framework of social and environmental sustainability is quickly becoming a distinct driver of economic success in the near term while simultaneously promoting important longer-term global ecological and societal goals, ” Moros added.
Certain tax-exempt U.S. and non-U.S. investors can invest in Kenmar's funds, with a number of limitations. Kenmar is primarily targeting institutional investors with a minimum investment of $5 million.
“Global Eco Fund brings a new dimension to SRI and ESG investing,” de Bontin said. “It brings together the best traditional long-only asset managers with the best commodity hedge funds. Investments in commodities and raw materials are an integral part of the SRI and ESG movements, but are difficult to access via traditional mutual funds. Kenmar Eco Fund facilitates such investments.”
Kenmar's eight-member Investment Committee, co-chaired by co-CIOs Marc Goodman and Ken Shewer, make investment decisions for this and all of the Kenmar funds, based on the recommendations of the Research & Risk Management Group.
Kenmar Global ECO Fund joins a small, but growing number of funds of funds available to SRI investors. The Good Steward Fund and Gabelli Asset Management Company are two hedge funds of funds that follow Catholic values. Winslow Management Company has an environmental hedge fund, while Green Cay Asset Management has four SRI hedge funds.
Fund industry will play key role in climate change investing, Deutsche Bank's Kevin Parker says
DeAM Signs United Nations Principles for Responsible Investment, Joins Investor Network on Climate Risk
New York, February 14, 2008
Deutsche Bank's Kevin Parker will today tell an influential United Nations conference that the mutual fund industry can play an important role in helping the global economy respond to the challenge of climate change. Parker, Global Head of Deutsche Bank's Asset Management division (DeAM) and a member of the Bank's Group Executive Committee, is speaking this afternoon at the United Nations Investor Summit on Climate Risk in New York.
Parker says: "About $26 trillion is held in mutual fund funds worldwide. As asset managers, we can play a critical role in mobilizing this vast pool of capital to support companies that respond most effectively to climate change.
"Climate change will affect almost every industry and region. The mutual fund industry can facilitate and accelerate this process, first by developing investment strategies and products that take account of the impact of climate change, and second by helping investors better understand this phenomenon and how it impacts their investment decisions.
"Our retail fund business, known globally as DWS, had around $10 billion of assets under management (AuM) in climate-related funds at the end of November 2007 - 15% of the estimated $66 billion** raised so far globally in the mutual fund space. By year-end 2007, DWS AuM had grown to approximately $11bn. Our fund distributor, DWS Scudder Distributors, Inc., launched the first climate change fund in the US in September 2007."
Parker adds: "There is a common misconception that a trade-off exists between environmentally responsible investing and strong investment performance. I believe that, on the contrary, it is a win-win for fund investors and businesses as investor capital is channelled towards companies that profit from mitigating and adapting to climate change. Climate change is going to be one of the dominant investment themes of the foreseeable future. It will be an important source of potential returns.
"The investment opportunities will improve radically when we overcome a further misconception: that fossil fuels are cheap compared with alternative energy. The apparent price differential is illusory because the 'externalities' of fossil fuels are not normally priced in - for instance, the cost of cleaning up the pollution they cause. However, in response to government regulation, a system of pricing carbon that takes account of these externalities is spreading through global financial markets. This will inevitably make alternative energy technologies far more economically competitive with fossil fuels."
Parker also announced today that DeAM has signed up to the United Nations Principles for Responsible Investment (UN PRI). The six principles, which are voluntary, provide a framework to help investors integrate environmental, social and corporate governance (ESG) considerations into their investment activities. At the start of 2008, the UN PRI had almost 200 signatories, representing more than $10 trillion of assets under management.
To encourage investor awareness, DeAM has also joined the Investor Network on Climate Risk (INCR). INCR is a global network of institutional investors and financial institutions that promotes understanding of the financial risks and investment opportunities posed by climate change. Launched at the first Institutional Investor Summit on Climate Risk at the United Nations in November 2003, INCR now includes more than 60 investment institutions collectively manage nearly $5 trillion of assets.
** This figure identifies climate change-related mutual funds with data provided from FERI and SimFund. A fund's inclusion is based on fund classification and criteria applied by DeAM (funds invested primarily in climate change opportunities, alt/renewable energy, environmental/green/sustainable and water).
For further information, please call:
Ted Meyer
+1 212-250-7253
Media Relations, Deutsche Bank
About Deutsche Bank
Deutsche Bank is a leading global investment bank with a strong and profitable private clients franchise. A leader in Germany and Europe, the bank is continuously growing in North America, Asia and key emerging markets. With 78,291 employees in 76 countries, Deutsche Bank competes to be the leading global provider of financial solutions for demanding clients creating exceptional value for its shareholders and people.
http://www.db.com/
About Deutsche Asset Management
With approximately $815 billion in assets under management globally (as of 31 December 2007), Deutsche Bank's Asset Management division is one of the world's leading investment management organizations, not just in size, but in quality and breadth of investment products, performance and client service. The Asset Management division provides a broad range of investment management products across the risk/return spectrum.
http://www.deam.com/
New York, February 14, 2008
Deutsche Bank's Kevin Parker will today tell an influential United Nations conference that the mutual fund industry can play an important role in helping the global economy respond to the challenge of climate change. Parker, Global Head of Deutsche Bank's Asset Management division (DeAM) and a member of the Bank's Group Executive Committee, is speaking this afternoon at the United Nations Investor Summit on Climate Risk in New York.
Parker says: "About $26 trillion is held in mutual fund funds worldwide. As asset managers, we can play a critical role in mobilizing this vast pool of capital to support companies that respond most effectively to climate change.
"Climate change will affect almost every industry and region. The mutual fund industry can facilitate and accelerate this process, first by developing investment strategies and products that take account of the impact of climate change, and second by helping investors better understand this phenomenon and how it impacts their investment decisions.
"Our retail fund business, known globally as DWS, had around $10 billion of assets under management (AuM) in climate-related funds at the end of November 2007 - 15% of the estimated $66 billion** raised so far globally in the mutual fund space. By year-end 2007, DWS AuM had grown to approximately $11bn. Our fund distributor, DWS Scudder Distributors, Inc., launched the first climate change fund in the US in September 2007."
Parker adds: "There is a common misconception that a trade-off exists between environmentally responsible investing and strong investment performance. I believe that, on the contrary, it is a win-win for fund investors and businesses as investor capital is channelled towards companies that profit from mitigating and adapting to climate change. Climate change is going to be one of the dominant investment themes of the foreseeable future. It will be an important source of potential returns.
"The investment opportunities will improve radically when we overcome a further misconception: that fossil fuels are cheap compared with alternative energy. The apparent price differential is illusory because the 'externalities' of fossil fuels are not normally priced in - for instance, the cost of cleaning up the pollution they cause. However, in response to government regulation, a system of pricing carbon that takes account of these externalities is spreading through global financial markets. This will inevitably make alternative energy technologies far more economically competitive with fossil fuels."
Parker also announced today that DeAM has signed up to the United Nations Principles for Responsible Investment (UN PRI). The six principles, which are voluntary, provide a framework to help investors integrate environmental, social and corporate governance (ESG) considerations into their investment activities. At the start of 2008, the UN PRI had almost 200 signatories, representing more than $10 trillion of assets under management.
To encourage investor awareness, DeAM has also joined the Investor Network on Climate Risk (INCR). INCR is a global network of institutional investors and financial institutions that promotes understanding of the financial risks and investment opportunities posed by climate change. Launched at the first Institutional Investor Summit on Climate Risk at the United Nations in November 2003, INCR now includes more than 60 investment institutions collectively manage nearly $5 trillion of assets.
** This figure identifies climate change-related mutual funds with data provided from FERI and SimFund. A fund's inclusion is based on fund classification and criteria applied by DeAM (funds invested primarily in climate change opportunities, alt/renewable energy, environmental/green/sustainable and water).
For further information, please call:
Ted Meyer
+1 212-250-7253
Media Relations, Deutsche Bank
About Deutsche Bank
Deutsche Bank
http://www.db.com/
About Deutsche Asset Management
With approximately $815 billion in assets under management globally (as of 31 December 2007), Deutsche Bank's Asset Management division is one of the world's leading investment management organizations, not just in size, but in quality and breadth of investment products, performance and client service. The Asset Management division provides a broad range of investment management products across the risk/return spectrum.
http://www.deam.com/
Parker Global launches energy infrastructure fund
Hedge Fund Review 2008-09-09
Fund of hedge funds manager Parker Global Strategies (PGS) has launched a sector-focused strategy investing in US energy infrastructure. The fund, known as PGS High Income Trust (HIT), initially launched with $500 million. The fund allocates to five managers running customised mandates for the trust.
Parker said the strategy provides a diversification opportunity as the correlation with traditional equity and bond markets has been relatively low over the years.
“In a period with extremely challenging markets, we favour strategies which provide attractive yields, solid underlying business fundamentals and liquidity,” said Virginia Parker, managing member and chief investment officer of PGS.
This is the second fund PGS has launched in energy and natural resources. The first, PGS Global Energy Edge, launched in March 2007 and allocates to energy, natural resources, water and environmental strategies.
The fund expects to attract primarily Asian investors but is offering it globally. It is domiciled in a Cayman Islands and does not have a prime broker. It has a yearly 1% management fee and a 20% performance fee.
Parker added her company had been researching and looking for several years at the sector. “The investment opportunities were compelling for this area so we decided to investigate it. Yields are close to 9% and the growth rate is going up. The fundamentals of companies in the sector are strong and there is liquidity,” she said.
Fund of hedge funds manager Parker Global Strategies (PGS) has launched a sector-focused strategy investing in US energy infrastructure. The fund, known as PGS High Income Trust (HIT), initially launched with $500 million. The fund allocates to five managers running customised mandates for the trust.
Parker said the strategy provides a diversification opportunity as the correlation with traditional equity and bond markets has been relatively low over the years.
“In a period with extremely challenging markets, we favour strategies which provide attractive yields, solid underlying business fundamentals and liquidity,” said Virginia Parker, managing member and chief investment officer of PGS.
This is the second fund PGS has launched in energy and natural resources. The first, PGS Global Energy Edge, launched in March 2007 and allocates to energy, natural resources, water and environmental strategies.
The fund expects to attract primarily Asian investors but is offering it globally. It is domiciled in a Cayman Islands and does not have a prime broker. It has a yearly 1% management fee and a 20% performance fee.
Parker added her company had been researching and looking for several years at the sector. “The investment opportunities were compelling for this area so we decided to investigate it. Yields are close to 9% and the growth rate is going up. The fundamentals of companies in the sector are strong and there is liquidity,” she said.
Virgin Launches New Green Fund
Virgin Money is launching a green fund which will invest only in companies committed to high environmental standards. To launch Virgin Climate Change Fund, Virgin teamed up with GLG Partners, who will act as fund advisors, and Trucost PLC, who will provide environmental data. “Consumers are changing the way they spend and are increasingly looking for more environmentally friendly ways of investing their money,” said Richard Branson.
According to research from Virgin Money, 29 percent of consumers prefer products and services from environmentally-friendly companies, and 68 percent said if data were available on a company’s carbon footprint, they would pay more attention to the issue.
At least 75 percent of the fund will be invested in an environmentally-filtered basket of European shares, and only companies who have a better than average environmental record in their sector will be selected. Another 15 percent will be invested in companies adopting environment best practice, and 10 percent will be invested in firms specializing in solutions to environmental problems.
The Virgin Climate Change Fund opens for business on January 21 and will be available through IFAs and direct to the public.
This Fund is another initiative in the list of Virgin’s environmental commitment, which includes $3 billion for renewable energy and a partnership to develop ethanol. Last year, Virgin partnered with Boeing to develop planes that use biofuel.
According to research from Virgin Money, 29 percent of consumers prefer products and services from environmentally-friendly companies, and 68 percent said if data were available on a company’s carbon footprint, they would pay more attention to the issue.
At least 75 percent of the fund will be invested in an environmentally-filtered basket of European shares, and only companies who have a better than average environmental record in their sector will be selected. Another 15 percent will be invested in companies adopting environment best practice, and 10 percent will be invested in firms specializing in solutions to environmental problems.
The Virgin Climate Change Fund opens for business on January 21 and will be available through IFAs and direct to the public.
This Fund is another initiative in the list of Virgin’s environmental commitment, which includes $3 billion for renewable energy and a partnership to develop ethanol. Last year, Virgin partnered with Boeing to develop planes that use biofuel.
Philly Shop Plants Environmental Fund Of Hedge Funds
October 26, 2007
FIS Group, a $2 billion Philadelphia-based consulting and traditional asset management shop, is making its first foray into the hedge fund space via an environmental fund of hedge funds. The firm is currently prepping the Eden Global Fund for launch sometime in the first quarter with some $50 million in seed capital from institutional investors.
Nick Kinney, vice president of sales and marketing for the firm, said that FIS has started one of just two global funds of hedge funds focused exclusively on the environmental area. “Other than convincing somebody to go into cleantech directly, there isn’t another mechanism for it. So we thought it would be a great opportunity to provide a fund of funds operating in this area.”
The Eden Fund will allocate 60% of its portfolio to carbon origination and trading, 30% to water strategies and about 10% to clean technology and sustainable energy. “Right now, the carbon market is dominating the high alpha that’s coming out of the environmental space,” said Kinney.
Private equity investors need not feel left out: The fund sports a 10% to 20% side pocket for private equity investments. The fund will invest in nine to 12 underlying managers and has a capacity of $500 million. Roger Kenyon is the portfolio manager for the new offering.
The Carbon fund charges 1.5% for management and 10% for performance, with a $5 million minimum investment requirement for institutional investors.
FIS was founded by Tina Byles Williams, a former senior consultant at pension investment consulting firm WHP Inc., in February 1996. Before joining WHP in 1994, she served as chief investment officer of the City of Philadelphia Board of Pensions and Retirement.
FIS Group, a $2 billion Philadelphia-based consulting and traditional asset management shop, is making its first foray into the hedge fund space via an environmental fund of hedge funds. The firm is currently prepping the Eden Global Fund for launch sometime in the first quarter with some $50 million in seed capital from institutional investors.
Nick Kinney, vice president of sales and marketing for the firm, said that FIS has started one of just two global funds of hedge funds focused exclusively on the environmental area. “Other than convincing somebody to go into cleantech directly, there isn’t another mechanism for it. So we thought it would be a great opportunity to provide a fund of funds operating in this area.”
The Eden Fund will allocate 60% of its portfolio to carbon origination and trading, 30% to water strategies and about 10% to clean technology and sustainable energy. “Right now, the carbon market is dominating the high alpha that’s coming out of the environmental space,” said Kinney.
Private equity investors need not feel left out: The fund sports a 10% to 20% side pocket for private equity investments. The fund will invest in nine to 12 underlying managers and has a capacity of $500 million. Roger Kenyon is the portfolio manager for the new offering.
The Carbon fund charges 1.5% for management and 10% for performance, with a $5 million minimum investment requirement for institutional investors.
FIS was founded by Tina Byles Williams, a former senior consultant at pension investment consulting firm WHP Inc., in February 1996. Before joining WHP in 1994, she served as chief investment officer of the City of Philadelphia Board of Pensions and Retirement.
12/25/2008
Green Trading & Carbon Finance
Tuesday, September 16th: 9:45am - 10:45am
With soaring oil prices and global warming, energy conservation and environmental impact are becoming some of the largest areas of focus across Society and around the globe. This session brings together leaders in the field to examine trends and sustainability of breakthroughs in these areas, along with focusing on how traders and investors can profit.
Moderator:
Brad Gentry, Director of the Center for Business and the Environment at
the Yale School of Forestry and Environmental Studies
Panel:
Paul Ezekiel, Global Head of Carbon Trading for Credit Suisse
Peter Fusaro, Chairman of Global Change Associates
Martin Whittaker, Director of Environmental Finance Strategy for Mission Point Capital
Benjamin Chesir, Senior Vice President, New Product Development, NYMEX
With soaring oil prices and global warming, energy conservation and environmental impact are becoming some of the largest areas of focus across Society and around the globe. This session brings together leaders in the field to examine trends and sustainability of breakthroughs in these areas, along with focusing on how traders and investors can profit.
Moderator:
Brad Gentry, Director of the Center for Business and the Environment at
the Yale School of Forestry and Environmental Studies
Panel:
Paul Ezekiel, Global Head of Carbon Trading for Credit Suisse
Peter Fusaro, Chairman of Global Change Associates
Martin Whittaker, Director of Environmental Finance Strategy for Mission Point Capital
Benjamin Chesir, Senior Vice President, New Product Development, NYMEX
Green energy investment bubble bursts
15 December 2008 - Mike Foster
Environmental concerns give way to fears of recession
A slackening in the growth rate of fossil fuel consumption gave comfort to environmentalists in 2008, as recession began to grip global economies. But, in most respects, this year was awful for the green bandwagon, which came to a halt as debt and equity finance dried up.
Clean energy stocks crashed by two thirds. The chart of the WilderHill New Energy Global Innovation index resembles the Nasdaq Technology index in 2000.
The quality of management for projects has come into question, with analysts saying enthusiasm for a good cause has been getting in the way of operational efficiency.
State subsidies are distorting the market. Governments are failing to force companies to disclose emissions. A replacement to the Kyoto climate change protocol, expiring in 2012, has yet to be agreed. Global leaders will debate the next protocol in Copenhagen, Denmark, next year, but preliminary meetings have failed to achieve common cause.
Carbon trading is dependent on good results. Post-2012 carbon emission permits are trading at half the price of this year’s equivalents, which have fallen in value. Slovakia has dumped 10 million surplus credits and Russia rushed out a statement denying it would sell its mountain of surplus credits.
International Energy Agency analyst Ralph Sims, who attended Poznan, said everything depended on US President-elect Barack Obama rebuilding momentum. He would deliver comfort, but an effective response to climate change would need him to push the political, business and fiscal agenda in favour of a green new deal. This is a tall order when his priority is to rebuild the US economy.
Elsewhere, New Zealand decided to review its support for a carbon trading initiative out of concern about its impact on local agriculture. Power companies, led by Germany’s RWE, are objecting to a European initiative to put a price on carbon dioxide emission permits via auction in 2013.
Independent analyst Bjørn Lomborg told a Financial News conference this month that temperature rises can be seen as beneficial and investment in other areas could deliver a better return to society. Scientists argue, however, there is a risk of runaway climate change if carbon dioxide emissions continue to rise and Arctic ice melts.
Sims said: “It looks like emissions will now lead to a dangerously high temperature increase of more than two degrees.” He said annual coastal flooding, droughts, heatwaves and irreversible climate change will result from a three degree increase, but he added that change is hard to prove.
Delegates at the Financial News Green Investing conference were concerned by events. Adverse conditions in the market have pushed last year’s debt spreads of 50 basis points to more than 200, where clean energy projects can find funds at all.
Simon Drury, partner at Climate Change Capital Private Equity Fund, said 25% of banks are prepared to commit to clean energy, 25% are not, and 50% are receiving phone calls, but not lending at present. He said: “The funding gap on some deals is 100%.”
From covenant-lite, banks have moved to a position where operational statements are regularly inspected. Conference sponsor WestLB is still a participant, but global energy director of the German bank, Stephen Spencer, told the FN conference: “There has been a tightening. Transactions are being done using a much more conservative structure.”
He said lenders are keen to ascertain local regulatory requirements. Another delegate said governments could encourage banks to take a localised approach, but international syndication would be impossible.
Funds in Morningstar’s ecology sector, which invest in a range of sustainability stocks, are less affected than the Nex index, but have underperformed mainstream funds. The Virgin Climate Change Fund, advised by GLG, is down 48% since February, against the MSCI World’s 18.5% fall. The next-worst performer is an ecological fund sponsored by Dresdner RCM, which fell 34.6%, after raising €1.5bn in 2007.
Wayne Woo, director of investor Good Energies, said founders are becoming more willing to part with equity to fund clean technology operations: “In the past, they resisted selling more than 50%. They are now prepared to go to 75%.” He said terms from financiers had become “a bit onerous”, but added this was to be expected.
Venture capitalists in Silicon Valley have lost a fortune on biofuels and have become cautious. Listed clean energy companies are struggling and a few have gone bust.
UK-listed Ceres Power Holdings has developed expertise in boiler technology and enticed utility company Centrica into buying a 10% stake at 300p a share last February. Its shares have since fallen 102p.
Rob Wylie, co-founder of clean technology venture fund Wheb Ventures, said he could not make out a business case for projects depending on state subsidies for long-term finance: “I found it particularly hard to understand the enthusiasm for biofuels. There’s too much competition from Brazil and oil.” Wheb concentrates on energy efficiency and related information technology.
Peter Horsburgh, founding partner of the Environmental Technologies Fund, said ventures that save energy and promote clean energy would succeed. He is interested in a project that creates biofuels out of waste products from pulp and paper manufacturing, plus another which seeks to create energy out of vibrations. He said: “You need to be quite eclectic.”
Simon Thomas, chief executive of data provider Trucost, has put together a passive fund with a bias to companies that emit 35% less carbon than mainstream stocks.
Venture Business Research has surveyed 600 industry participants, according to chief executive Douglas Lloyd. It confirmed developers are less interested in capital intensive projects, such as tidal and wind power. Solar power and energy efficiency are more popular.
Large companies ranging from steel producer ArcelorMittal to retailer Wal-Mart have developed environmental credentials. However, their decision to back initiatives predates the credit crunch. The amount invested in the sector fell from $148bn (€112bn) to $142bn in 2008, according to information service New Energy Finance. The rate of decrease could accelerate in the next few months.
Data supplied by New Energy Finance shows landfill projects are lagging expectations. Hydro and wind projects are also behind target, although industrial gas projects are doing well.
Registration of carbon projects has stagnated, while applications have risen. Issues relating to audits carried out by Norwegian agent DNV, which historically verified nearly half the total, have led to its suspension by the UN, although it hopes to regain accreditation within two months.
Environmental concerns give way to fears of recession
A slackening in the growth rate of fossil fuel consumption gave comfort to environmentalists in 2008, as recession began to grip global economies. But, in most respects, this year was awful for the green bandwagon, which came to a halt as debt and equity finance dried up.
Clean energy stocks crashed by two thirds. The chart of the WilderHill New Energy Global Innovation index resembles the Nasdaq Technology index in 2000.
The quality of management for projects has come into question, with analysts saying enthusiasm for a good cause has been getting in the way of operational efficiency.
State subsidies are distorting the market. Governments are failing to force companies to disclose emissions. A replacement to the Kyoto climate change protocol, expiring in 2012, has yet to be agreed. Global leaders will debate the next protocol in Copenhagen, Denmark, next year, but preliminary meetings have failed to achieve common cause.
Carbon trading is dependent on good results. Post-2012 carbon emission permits are trading at half the price of this year’s equivalents, which have fallen in value. Slovakia has dumped 10 million surplus credits and Russia rushed out a statement denying it would sell its mountain of surplus credits.
International Energy Agency analyst Ralph Sims, who attended Poznan, said everything depended on US President-elect Barack Obama rebuilding momentum. He would deliver comfort, but an effective response to climate change would need him to push the political, business and fiscal agenda in favour of a green new deal. This is a tall order when his priority is to rebuild the US economy.
Elsewhere, New Zealand decided to review its support for a carbon trading initiative out of concern about its impact on local agriculture. Power companies, led by Germany’s RWE, are objecting to a European initiative to put a price on carbon dioxide emission permits via auction in 2013.
Independent analyst Bjørn Lomborg told a Financial News conference this month that temperature rises can be seen as beneficial and investment in other areas could deliver a better return to society. Scientists argue, however, there is a risk of runaway climate change if carbon dioxide emissions continue to rise and Arctic ice melts.
Sims said: “It looks like emissions will now lead to a dangerously high temperature increase of more than two degrees.” He said annual coastal flooding, droughts, heatwaves and irreversible climate change will result from a three degree increase, but he added that change is hard to prove.
Delegates at the Financial News Green Investing conference were concerned by events. Adverse conditions in the market have pushed last year’s debt spreads of 50 basis points to more than 200, where clean energy projects can find funds at all.
Simon Drury, partner at Climate Change Capital Private Equity Fund, said 25% of banks are prepared to commit to clean energy, 25% are not, and 50% are receiving phone calls, but not lending at present. He said: “The funding gap on some deals is 100%.”
From covenant-lite, banks have moved to a position where operational statements are regularly inspected. Conference sponsor WestLB is still a participant, but global energy director of the German bank, Stephen Spencer, told the FN conference: “There has been a tightening. Transactions are being done using a much more conservative structure.”
He said lenders are keen to ascertain local regulatory requirements. Another delegate said governments could encourage banks to take a localised approach, but international syndication would be impossible.
Funds in Morningstar’s ecology sector, which invest in a range of sustainability stocks, are less affected than the Nex index, but have underperformed mainstream funds. The Virgin Climate Change Fund, advised by GLG, is down 48% since February, against the MSCI World’s 18.5% fall. The next-worst performer is an ecological fund sponsored by Dresdner RCM, which fell 34.6%, after raising €1.5bn in 2007.
Wayne Woo, director of investor Good Energies, said founders are becoming more willing to part with equity to fund clean technology operations: “In the past, they resisted selling more than 50%. They are now prepared to go to 75%.” He said terms from financiers had become “a bit onerous”, but added this was to be expected.
Venture capitalists in Silicon Valley have lost a fortune on biofuels and have become cautious. Listed clean energy companies are struggling and a few have gone bust.
UK-listed Ceres Power Holdings has developed expertise in boiler technology and enticed utility company Centrica into buying a 10% stake at 300p a share last February. Its shares have since fallen 102p.
Rob Wylie, co-founder of clean technology venture fund Wheb Ventures, said he could not make out a business case for projects depending on state subsidies for long-term finance: “I found it particularly hard to understand the enthusiasm for biofuels. There’s too much competition from Brazil and oil.” Wheb concentrates on energy efficiency and related information technology.
Peter Horsburgh, founding partner of the Environmental Technologies Fund, said ventures that save energy and promote clean energy would succeed. He is interested in a project that creates biofuels out of waste products from pulp and paper manufacturing, plus another which seeks to create energy out of vibrations. He said: “You need to be quite eclectic.”
Simon Thomas, chief executive of data provider Trucost, has put together a passive fund with a bias to companies that emit 35% less carbon than mainstream stocks.
Venture Business Research has surveyed 600 industry participants, according to chief executive Douglas Lloyd. It confirmed developers are less interested in capital intensive projects, such as tidal and wind power. Solar power and energy efficiency are more popular.
Large companies ranging from steel producer ArcelorMittal to retailer Wal-Mart have developed environmental credentials. However, their decision to back initiatives predates the credit crunch. The amount invested in the sector fell from $148bn (€112bn) to $142bn in 2008, according to information service New Energy Finance. The rate of decrease could accelerate in the next few months.
Data supplied by New Energy Finance shows landfill projects are lagging expectations. Hydro and wind projects are also behind target, although industrial gas projects are doing well.
Registration of carbon projects has stagnated, while applications have risen. Issues relating to audits carried out by Norwegian agent DNV, which historically verified nearly half the total, have led to its suspension by the UN, although it hopes to regain accreditation within two months.
Why Invest in Green Tech?
from http://www.sustainability2008.com/invest.htm 2008
What is GreenTech?
GreenTech can be understood as innovative products or practices that reduce environmental costs while enhancing performance. More specifically, the GreenTech sector encompasses clean and renewable energy, power storage and efficiency, water and waste management, pollution control, green construction, recycling, green agriculture, and clean products. In a period of heightened environmental concern, GreenTech is of increasing interest to governments, companies, and investors alike.
What factors drive the GreenTech sector?
Growth in the GreenTech sector is largely a result of environmental issues which have forced heightened eco-consciousness. In particular, the rising price of energy and natural resources, a growing global energy demand, concern over energy security, increasingly stringent environmental regulations, and the economic and environmental volatility of fossil fuels continue to stimulate GreenTech development and practice.
What can GreenTech offer investors?
Through investment in GreenTech, investors are provided the dual opportunity to support the environment while generating profit. Of GreenTech’s many appealing attributes, no single technology lends itself as the sole solution to environmental concerns and high energy demand. Instead, a wide array of technologies are likely to become successful in specific areas of application, and as such, investors are presented with a diverse range of profitable opportunities. Additionally, as GreenTech remains a relatively young marketplace and renewable energy in particular a relatively small portion of global energy demand, the sector offers immense growth potential.
Facts and Figures
- Over a ten year period to May, 2004, the Vortex-Cleantech Index (+267%) out-placed both the Nasdaq (+181%) and the Russell 2000 (+146%). The VCI’s solid showing was built on a broad foundation – no single industry segment dominated overall performance. 1
- GreenTech acquisitions returned a median 4.1x invested capital. 2
- Using a sample of 56 GreenTech IPO’s, the median estimated IPO returns were 433%, or about 5.3 times invested capital. 3
- Annual revenue for the four clean energy technologies – biofuels, wind power, solar power, and fuel cells is up 40% from 2007, and is projected to quadruple by 2016. 4
- GreenTech markets represent annual global revenues upwards of $150 billion. 5
1. James LoGerfo, Cleantech Venture Investment: Patterns and Performance (2004) 8.
2. James LoGerfo, Cleantech Venture Investment: Patterns and Performance (2004) 8.
3. James LoGerfo, Cleantech Venture Investment: Patterns and Performance (2004) 7.
4. Clean Edge Inc., Clean Energy Trends 2008 (2008).
5. James LoGerfo, Cleantech Venture Investment: Patterns and Performance (2004) 6.
What is GreenTech?
GreenTech can be understood as innovative products or practices that reduce environmental costs while enhancing performance. More specifically, the GreenTech sector encompasses clean and renewable energy, power storage and efficiency, water and waste management, pollution control, green construction, recycling, green agriculture, and clean products. In a period of heightened environmental concern, GreenTech is of increasing interest to governments, companies, and investors alike.
What factors drive the GreenTech sector?
Growth in the GreenTech sector is largely a result of environmental issues which have forced heightened eco-consciousness. In particular, the rising price of energy and natural resources, a growing global energy demand, concern over energy security, increasingly stringent environmental regulations, and the economic and environmental volatility of fossil fuels continue to stimulate GreenTech development and practice.
What can GreenTech offer investors?
Through investment in GreenTech, investors are provided the dual opportunity to support the environment while generating profit. Of GreenTech’s many appealing attributes, no single technology lends itself as the sole solution to environmental concerns and high energy demand. Instead, a wide array of technologies are likely to become successful in specific areas of application, and as such, investors are presented with a diverse range of profitable opportunities. Additionally, as GreenTech remains a relatively young marketplace and renewable energy in particular a relatively small portion of global energy demand, the sector offers immense growth potential.
Facts and Figures
- Over a ten year period to May, 2004, the Vortex-Cleantech Index (+267%) out-placed both the Nasdaq (+181%) and the Russell 2000 (+146%). The VCI’s solid showing was built on a broad foundation – no single industry segment dominated overall performance. 1
- GreenTech acquisitions returned a median 4.1x invested capital. 2
- Using a sample of 56 GreenTech IPO’s, the median estimated IPO returns were 433%, or about 5.3 times invested capital. 3
- Annual revenue for the four clean energy technologies – biofuels, wind power, solar power, and fuel cells is up 40% from 2007, and is projected to quadruple by 2016. 4
- GreenTech markets represent annual global revenues upwards of $150 billion. 5
1. James LoGerfo, Cleantech Venture Investment: Patterns and Performance (2004) 8.
2. James LoGerfo, Cleantech Venture Investment: Patterns and Performance (2004) 8.
3. James LoGerfo, Cleantech Venture Investment: Patterns and Performance (2004) 7.
4. Clean Edge Inc., Clean Energy Trends 2008 (2008).
5. James LoGerfo, Cleantech Venture Investment: Patterns and Performance (2004) 6.
The GreenVest 2007 Green Tech Investment Conference
Submitted by Dan Sweeney on Thu, 2007-06-28 17:18.
GreenVest 2007 is the second so-called green tech investment conference I've attended this month. I didn't get around to reporting on the first one, but I guess I can't skip two in row and still keep my press credentials, so here goes.
GreenVest 2007 took place on June 26 and 27 in San Francisco at the Westin Hotel on Market Street and was hosted by Terrapinn, a trade show organization. I only attended the first day, but I trust that was enough to get the flavor of the event if not to be exposed to all of the accumulated wisdom of the venture capital presenters.
GreenVest consisted of a bunch of panel discussions, most of them back to back, and some scattered networking sessions where one might attempt to rub elbows with the lords and ladies of finance. Mostly these gentlefolk spoke only with one another, but occasionally bestowed a glance or a word on some individual within a considerable throng of hopeful entrepreneurs, all of whom had paid good money for a chance of making a mini pitch to some individual who, in the ordinary course of things, would not return emails or phone calls. The panelists were almost all financial guys, so one got a fairly uniform perspective on an industry that is otherwise largely lacking in uniformity.
The discussion touched upon a broad range of topics—what after all is a green technology and how many diverse categories might the term encompass—but alternative energy was definitely in the forefront and is clearly where most of the money is going.
The panelists all hailed from the larger institutions with concentrations in this area, including Draper Fisher Jurvetson; Mohr, Davidow Ventures; Jane Capital Partners; Nth Power; and Chrysalix Energy Venture Capital among others. What somewhat surprised me was the degree of expertise that most of these folks appeared to have in the area. My experience with venture capital was largely accumulated at the end of the last decade within the telecom sector, an era and a sector replete with gross hyperbole, foolish investments, and inane pronouncements on the "New Economy" uttered by members of the venture capital community who had been catapulted to sudden prominence and who were making and squandering literally trillions of dollars. For the most part then they were literally money drunk, and because most of them had never experienced a full blown bubble economy, they had little insight into the dynamics of the markets they were exploiting. It was the kind of episodic raging bull market that occurred with a certain predictable periodicity throughout the nineteenth century and up until Great Depression in the twentieth century, but was really rather rare and subdued in the post World War II period, perhaps because of the array of government constraints intended to damp market fluctuations that had come into play in the thirties. Only when Reagan began to weaken those constraints could the running of the bulls take place again.
Interestingly, the panelists kept returning to the question of whether green tech would bubble also, and most opined that it would. The fundamentals weren't entirely solid, the market was overheated, the return on investment was too long, the incumbent technologies were too strong, and so on, but, at the same time, all suggested that there were opportunities aplenty and lots of money to be made.
Panel discussions may be somewhat more lively than a succession of presenter monologues—although that is debatable—but they rarely allow a thought or an argument to be developed, and they almost never provide a comprehensive overview of any individual segment of an industry. In this respect the GreenVest panels were true to form. One heard a considerable number of interesting remarks, but one didn't walk away with a notion of how this or that new technology might fit into the overall energy industry. The one exception I encountered was a cogent discussion of the wind industry by Jan Paulin, president of Padoma Wind Power which operates a number of wind farms.
Another presenter who was well worth listening to was James Hansel, managing director of Eight Winds Capital. Hansel was the only panelist I heard who was willing to come to grips with the issue of conventional oil availability and oil prices. Hansel himself believes that information on oil reserves in the public domain is too unreliable to permit trustworthy predictions on the arrival of peak oil, and he therefore asserts that the alternative fuels investor confronts three possible mid term pricing scenarios, a return to sub forty dollar a barrel oil for the indefinite future, a prolonged period of fifty to eighty dollar per barrel pricing, or, worst case, some kind of oil panic which would result in prices escalating well beyond eighty dollars and staying in the stratosphere for some time. A panic, Hansel believes, would most likely be brought about by some violent interruption of oil flow into world markets from the Middle East—possibly a war, a co-ordinated terrorist attack, or a severe natural disaster such as a hurricane or tsunami.
Hansel thinks that scenario one might bring about a near collapse of the alternative fuels business, and that scenario two will provide a modest stimulus to investment, while scenario three would cause money to flood into the sector. He further believes that scenario one is rather unlikely, that scenario two is highly likely, and that scenario three is possible.
Implicit in Hansel's remarks is the notion that scarcity is a more compelling driver than environmental damage, and I think he's right.
One thing that struck me about the financial types in general was that they avoided hyping alternative energy. Everyone expressed doubt that alternatives would unseat conventional energy even decades from now. If there is alternative energy Coolaid to be imbibed, these guys were definitely on the wagon.
A final observation:
From my perspective trade shows and conventions are scarcely worth attending unless they present one with hitherto unrecognized business opportunities or alert one to the presence of pitfall beyond one's ken. My purpose in attending was largely to show the flag and alert more people to the existence of our journal. To me that's a very real business opportunity.
Maybe some of the entrepreneurs felt the same way. Maybe even the briefest contact with a financial decision maker will be enough to turn one's fortunes around. Maybe it's like getting discovered by the film industry in the nineteen forties at a booth in the soda fountain across the street from Hollywood High. One day you're down, the next day you're deified….
But for the venture guys themselves I wonder. If they shut most of the scruffy entrepreneurs out of their offices, why are they willing to pay money to endure their pitches? Is it just so they can hobnob with one another and hear each other make the same observations at the panel discussions? I wonder.
GreenVest 2007 is the second so-called green tech investment conference I've attended this month. I didn't get around to reporting on the first one, but I guess I can't skip two in row and still keep my press credentials, so here goes.
GreenVest 2007 took place on June 26 and 27 in San Francisco at the Westin Hotel on Market Street and was hosted by Terrapinn, a trade show organization. I only attended the first day, but I trust that was enough to get the flavor of the event if not to be exposed to all of the accumulated wisdom of the venture capital presenters.
GreenVest consisted of a bunch of panel discussions, most of them back to back, and some scattered networking sessions where one might attempt to rub elbows with the lords and ladies of finance. Mostly these gentlefolk spoke only with one another, but occasionally bestowed a glance or a word on some individual within a considerable throng of hopeful entrepreneurs, all of whom had paid good money for a chance of making a mini pitch to some individual who, in the ordinary course of things, would not return emails or phone calls. The panelists were almost all financial guys, so one got a fairly uniform perspective on an industry that is otherwise largely lacking in uniformity.
The discussion touched upon a broad range of topics—what after all is a green technology and how many diverse categories might the term encompass—but alternative energy was definitely in the forefront and is clearly where most of the money is going.
The panelists all hailed from the larger institutions with concentrations in this area, including Draper Fisher Jurvetson; Mohr, Davidow Ventures; Jane Capital Partners; Nth Power; and Chrysalix Energy Venture Capital among others. What somewhat surprised me was the degree of expertise that most of these folks appeared to have in the area. My experience with venture capital was largely accumulated at the end of the last decade within the telecom sector, an era and a sector replete with gross hyperbole, foolish investments, and inane pronouncements on the "New Economy" uttered by members of the venture capital community who had been catapulted to sudden prominence and who were making and squandering literally trillions of dollars. For the most part then they were literally money drunk, and because most of them had never experienced a full blown bubble economy, they had little insight into the dynamics of the markets they were exploiting. It was the kind of episodic raging bull market that occurred with a certain predictable periodicity throughout the nineteenth century and up until Great Depression in the twentieth century, but was really rather rare and subdued in the post World War II period, perhaps because of the array of government constraints intended to damp market fluctuations that had come into play in the thirties. Only when Reagan began to weaken those constraints could the running of the bulls take place again.
Interestingly, the panelists kept returning to the question of whether green tech would bubble also, and most opined that it would. The fundamentals weren't entirely solid, the market was overheated, the return on investment was too long, the incumbent technologies were too strong, and so on, but, at the same time, all suggested that there were opportunities aplenty and lots of money to be made.
Panel discussions may be somewhat more lively than a succession of presenter monologues—although that is debatable—but they rarely allow a thought or an argument to be developed, and they almost never provide a comprehensive overview of any individual segment of an industry. In this respect the GreenVest panels were true to form. One heard a considerable number of interesting remarks, but one didn't walk away with a notion of how this or that new technology might fit into the overall energy industry. The one exception I encountered was a cogent discussion of the wind industry by Jan Paulin, president of Padoma Wind Power which operates a number of wind farms.
Another presenter who was well worth listening to was James Hansel, managing director of Eight Winds Capital. Hansel was the only panelist I heard who was willing to come to grips with the issue of conventional oil availability and oil prices. Hansel himself believes that information on oil reserves in the public domain is too unreliable to permit trustworthy predictions on the arrival of peak oil, and he therefore asserts that the alternative fuels investor confronts three possible mid term pricing scenarios, a return to sub forty dollar a barrel oil for the indefinite future, a prolonged period of fifty to eighty dollar per barrel pricing, or, worst case, some kind of oil panic which would result in prices escalating well beyond eighty dollars and staying in the stratosphere for some time. A panic, Hansel believes, would most likely be brought about by some violent interruption of oil flow into world markets from the Middle East—possibly a war, a co-ordinated terrorist attack, or a severe natural disaster such as a hurricane or tsunami.
Hansel thinks that scenario one might bring about a near collapse of the alternative fuels business, and that scenario two will provide a modest stimulus to investment, while scenario three would cause money to flood into the sector. He further believes that scenario one is rather unlikely, that scenario two is highly likely, and that scenario three is possible.
Implicit in Hansel's remarks is the notion that scarcity is a more compelling driver than environmental damage, and I think he's right.
One thing that struck me about the financial types in general was that they avoided hyping alternative energy. Everyone expressed doubt that alternatives would unseat conventional energy even decades from now. If there is alternative energy Coolaid to be imbibed, these guys were definitely on the wagon.
A final observation:
From my perspective trade shows and conventions are scarcely worth attending unless they present one with hitherto unrecognized business opportunities or alert one to the presence of pitfall beyond one's ken. My purpose in attending was largely to show the flag and alert more people to the existence of our journal. To me that's a very real business opportunity.
Maybe some of the entrepreneurs felt the same way. Maybe even the briefest contact with a financial decision maker will be enough to turn one's fortunes around. Maybe it's like getting discovered by the film industry in the nineteen forties at a booth in the soda fountain across the street from Hollywood High. One day you're down, the next day you're deified….
But for the venture guys themselves I wonder. If they shut most of the scruffy entrepreneurs out of their offices, why are they willing to pay money to endure their pitches? Is it just so they can hobnob with one another and hear each other make the same observations at the panel discussions? I wonder.
Green Mortgages Offer New Growth
Investors see opportunity, as lawmakers and consumers push for more energy-efficient loans
Published on: Thursday, September 11, 2008
If you could save up to $200 a month in energy bills for 30 years, would you be willing to borrow an extra $5,000 for a home loan upfront? Probably yes.
That’s the power of energy-efficient mortgages, or “green” mortgages. Now, legislators, lenders, brokers and consumers are pushing for their wider use. Advocates say green mortgages can help solve several of the nation’s broader problems, including the energy crisis, the mortgage implosion and the slowing economy.
“These programs can offer significant solutions,” said Norm Ferrier, owner of Security Mortgage Corporation, which specializes in green loans, “because homeowners are desperately seeking ways to lower their energy costs.”
Green mortgages save money and energy over time by improving energy-efficiencyGreen mortgages allow home buyers to add as much as an additional 15 percent of the sale price into the loan, for upgrades such as energy-efficient windows, water heaters, or solar panels. The savings in energy bills offset the higher monthly mortgage payments and create more savings in the long run.
Since the 1970s, major lenders backed by Fannie, Freddie, and the VA, have financed green mortgages, which are currently promoted under the Energy Star program. But these products languished during years of cheap oil and easy, sub-prime loans. Lenders and brokers avoided green loans because they took longer to close, but yielded no extra profits.
Now, as the energy crunch and mortgage crises converge, lawmakers and lenders regard green mortgages as a solution to both. Residential and commercial investors also see new opportunities in green loans. “We are an emerging market at a time when the traditional market has imploded,” said Jeffrey Cole, founder of myenergyloan.com. “The secondary market is embracing green mortgages.”
Legislators are rushing to support green mortgages. The Housing and Economic Recovery Act of 2008, signed by President Bush last month, includes a provision to streamline and promote green mortgages. The bill authorizes federal agencies to identify obstacles to existing products, recommend changes and educate the public.
Another federal bill would provide incentives to lenders offering lower interest rates on green residential and commercial mortgages. The Green Resources for Energy Efficient Neighborhoods Act, introduced by U.S. Rep Ed Perlmutter (CO-07), passed the House Financial Services Committee in June and now awaits a House hearing.
A sign of green appeal across industries, the bill was broadly supported by 30 national organizations, including lenders, real estate agents, developers, housing groups, environmentalists and scientists. “We are at a crossroads with our housing markets and our energy consumption,” said Leslie Oliver, communications and policy director for Rep. Perlmutter. “There was incentive and buy-in from organizations across the board.”
Texas legislators also recently passed a bill to develop energy ratings for homes, similar to fuel efficiency ratings for cars. This would create uniform lending and appraisal standards, making it easier to process such loans, said Harold Hunt, research economist at Texas A&M University’s Real Estate Center, which is working on this mandate.
Some states are enacting bills to promote green mortgages to buyers in diverse marketsOther states—such as New York, Vermont and California—have also enacted bills to promote green mortgages. But federal policies and infrastructure are needed to support state initiatives in the long term, said Security Mortgage’s Ferrier, who works with legislators to craft policy.
Consumer demand is also driving the push for green mortgages. While not disclosing the actual dollar value of loans closed, Cole of myenergyloan.com said that mortgage volume for green loans had risen 25 percent this year over last year.
Much of this growth is coming from the commercial market, said Cole. Last year, the bulk of the loans were residential, but this year, sixty percent are commercial. Many developers have been inquiring about green loans, not just to develop green buildings, but also to finance retail consumers when the units are ready, he said.
Business opportunity is so great, said Cole, that he and another partner are raising $10 million to fund the nation’s first green real estate finance bank. They hope to launch by October. “There is a lot of light on this market,” said Cole.
Ferrier of Security Mortgage notes that 70 percent of the country’s homes can benefit from energy efficiency upgrades. “This translates into an astounding 51 million residential homes that can qualify for energy upgrades,” he said.
A thriving green mortgage market could have multiple effects on the economy, said Ferrier. “They will address the energy crisis, by reducing the energy outlay by homeowners by anywhere from 30 to 50 percent, guaranteed. They can address the economy, by creating disposable income that far exceeds any stimulus package, because we save clients anywhere from $20 to $200 a month, year after year. It will address the mortgage implosion, because it has the potential to effectively create one of the biggest refinance booms in our history.”
“They offer not a pie-in-the-sky solution,” Ferrier said. “They’ve been tried, tested and proven.”
Published on: Thursday, September 11, 2008
If you could save up to $200 a month in energy bills for 30 years, would you be willing to borrow an extra $5,000 for a home loan upfront? Probably yes.
That’s the power of energy-efficient mortgages, or “green” mortgages. Now, legislators, lenders, brokers and consumers are pushing for their wider use. Advocates say green mortgages can help solve several of the nation’s broader problems, including the energy crisis, the mortgage implosion and the slowing economy.
“These programs can offer significant solutions,” said Norm Ferrier, owner of Security Mortgage Corporation, which specializes in green loans, “because homeowners are desperately seeking ways to lower their energy costs.”
Green mortgages save money and energy over time by improving energy-efficiencyGreen mortgages allow home buyers to add as much as an additional 15 percent of the sale price into the loan, for upgrades such as energy-efficient windows, water heaters, or solar panels. The savings in energy bills offset the higher monthly mortgage payments and create more savings in the long run.
Since the 1970s, major lenders backed by Fannie, Freddie, and the VA, have financed green mortgages, which are currently promoted under the Energy Star program. But these products languished during years of cheap oil and easy, sub-prime loans. Lenders and brokers avoided green loans because they took longer to close, but yielded no extra profits.
Now, as the energy crunch and mortgage crises converge, lawmakers and lenders regard green mortgages as a solution to both. Residential and commercial investors also see new opportunities in green loans. “We are an emerging market at a time when the traditional market has imploded,” said Jeffrey Cole, founder of myenergyloan.com. “The secondary market is embracing green mortgages.”
Legislators are rushing to support green mortgages. The Housing and Economic Recovery Act of 2008, signed by President Bush last month, includes a provision to streamline and promote green mortgages. The bill authorizes federal agencies to identify obstacles to existing products, recommend changes and educate the public.
Another federal bill would provide incentives to lenders offering lower interest rates on green residential and commercial mortgages. The Green Resources for Energy Efficient Neighborhoods Act, introduced by U.S. Rep Ed Perlmutter (CO-07), passed the House Financial Services Committee in June and now awaits a House hearing.
A sign of green appeal across industries, the bill was broadly supported by 30 national organizations, including lenders, real estate agents, developers, housing groups, environmentalists and scientists. “We are at a crossroads with our housing markets and our energy consumption,” said Leslie Oliver, communications and policy director for Rep. Perlmutter. “There was incentive and buy-in from organizations across the board.”
Texas legislators also recently passed a bill to develop energy ratings for homes, similar to fuel efficiency ratings for cars. This would create uniform lending and appraisal standards, making it easier to process such loans, said Harold Hunt, research economist at Texas A&M University’s Real Estate Center, which is working on this mandate.
Some states are enacting bills to promote green mortgages to buyers in diverse marketsOther states—such as New York, Vermont and California—have also enacted bills to promote green mortgages. But federal policies and infrastructure are needed to support state initiatives in the long term, said Security Mortgage’s Ferrier, who works with legislators to craft policy.
Consumer demand is also driving the push for green mortgages. While not disclosing the actual dollar value of loans closed, Cole of myenergyloan.com said that mortgage volume for green loans had risen 25 percent this year over last year.
Much of this growth is coming from the commercial market, said Cole. Last year, the bulk of the loans were residential, but this year, sixty percent are commercial. Many developers have been inquiring about green loans, not just to develop green buildings, but also to finance retail consumers when the units are ready, he said.
Business opportunity is so great, said Cole, that he and another partner are raising $10 million to fund the nation’s first green real estate finance bank. They hope to launch by October. “There is a lot of light on this market,” said Cole.
Ferrier of Security Mortgage notes that 70 percent of the country’s homes can benefit from energy efficiency upgrades. “This translates into an astounding 51 million residential homes that can qualify for energy upgrades,” he said.
A thriving green mortgage market could have multiple effects on the economy, said Ferrier. “They will address the energy crisis, by reducing the energy outlay by homeowners by anywhere from 30 to 50 percent, guaranteed. They can address the economy, by creating disposable income that far exceeds any stimulus package, because we save clients anywhere from $20 to $200 a month, year after year. It will address the mortgage implosion, because it has the potential to effectively create one of the biggest refinance booms in our history.”
“They offer not a pie-in-the-sky solution,” Ferrier said. “They’ve been tried, tested and proven.”
Obama: What He Means for Clean Energy Investors
Published on: Friday, November 07, 2008
Written by: Trista Winnie
Barack Obama, the 44th president of the United States, takes office in January. When Obama announced his candidacy in February 2007, the world was a different place; the war in Iraq was widely regarded as the key issue of the election.
What a difference an economic crisis makes.
The fallout of the subprime lending crisis took its toll and the U.S. economy fell into the deepest economic crisis in the country since the Great Depression, marked by skyrocketing foreclosure rates, widespread job losses, rising fuel, food and other consumer goods prices, stagnant wages, a record-breaking federal debt, a frozen credit market and extensive measures taken by the federal government to try to clean up the mess, most notably a $700 billion bailout bill and the seizure of Fannie Mae and Freddie Mac.
Thus, the economy quickly came to be the foremost issue in the minds of the American electorate; 63 percent of voters who took part in exit polls on election day said that the economy was their biggest concern, compared to the 2004 presidential election, when 18 percent of voters cited the economy as their biggest concern. And, because 80 percent of Americans believe the nation is on the wrong track, according to recent polling, "change" was the key word of this year's presidential campaign.
One of the Obama campaign's messages was that Obama represented a shift in economic policies compared to President George Bush and his administration. Obama's plans for energy and environmental policies represent another dramatic shift from those in place under the current president.
Though his ability to spend is likely to be hampered by the economic crisis to some degree, Obama has grand plans for boosting the economy, creating jobs and eventually ending America's oil addiction—particularly the country's addiction to foreign oil—by enacting his New Energy for America plan, which has multiple prongs for short-term to long-term benefit.
"Barack Obama’s green energy platform has gained him fans among that industry’s most powerful [people]—its investors," earth2tech reported. During the general election, investors backing cleantech companies donated six times more money to Obama than they did to his Republican opponent for the presidency, John McCain.
Obama's comprehensive energy plan entails putting $150 billion over 10 years into clean and alternative energies; he has also set an ambitious goal of bringing greenhouse gas emissions down to 80 percent below their 1990 levels by 2050; and he proposes managing out of control carbon emissions with a cap and trade system.
"Even though emissions limits are defined by the government, cap and trade is widely seen as a fair, market-driven way to, in Obama’s words, make 'dirty energy expensive,'" according to the Los Angeles Times. "Cap and trade auctions would channel $30 billion to $50 billion into public coffers annually, Obama estimates."
Pragmatism is a key to Obama's plan, which strives for a balance between maximum economic benefit and maximum environmental benefit; for example, the U.S. has extensive natural gas resources, so even though it is a fossil fuel rather than a renewable energy, Obama is in favor of drilling the Barnett Shale, a natural gas reserve near Arlington, Texas, as well as other drilling for natural gas in other places, and he has said he considers the construction of a natural gas pipeline in Alaska to be a priority. By 2012, Obama seeks to have 10 percent of the U.S. power supply come from renewable sources, after all, and 25 percent by 2025; the plan does not include trying to force the U.S. to go cold turkey on fossil fuels.
The plan does require the oil industry to use its resources more effectively, however. "Obama and [Vice President-Elect Joe] Biden will require oil companies to develop the 68 million acres of land (over 40 million of which are offshore) which they have already leased and are not drilling on," according to the Obama campaign's official website.
Oil and gas investments, then, could still be attractive to investors, even as the country will be making a shift toward renewable energy. Jobs will be created in areas around the country in places where natural gas and oil are present. But one of the most lucrative natural gas investments could simply be purchasing land with natural gas deposits underneath it; gas companies interested in the natural gas deposits pay leases and royalties for the rights to the natural gas. Some unsuspecting landowners have been ripped off by unscrupulous gas company employees and speculators, but savvy investors could look to retired dairy farmer Dewey Decker as an example: Decker negotiated with the gas companies and speculators who showed up and offered him $50 per acre, eventually signing a five-year contract in which he receives $2,411 per acre and royalties of 15 percent.
But, to help the U.S. reach that goal of deriving 10 percent of its energy from renewable sources in just four years, the Obama plan will offer incentives to those trying to get there and will see to it that the big oil industry is no longer so coddled by the federal government as it is now. For example, "Obama and Biden will enact a windfall profits tax on excessive oil company profits to give American families an immediate $1,000 emergency energy rebate to help families pay rising bills," according to Obama's website. "This relief would be a down payment on the Obama-Biden long-term plan to provide middle-class families with at least $1,000 per year in permanent tax relief."
Another sign of pragmatism is evidenced by the gradual tightening of standards on the struggling auto industry Obama plans, and the higher goals he has set. Concerned about their pocketbooks and their planet, consumers are shunning large cars and shifting toward smaller, more fuel-efficient cars. The industry has been slow to react, however, with the result that sales are dropping by nearly half for some; Obama's plan would require "raising car mileage standards 4 percent annually and would encourage to the auto industry to make all new vehicles flex-fuel-capable," according to the Los Angeles Times. Obama has also set a goal of having one million plug-in hybrid cars on America's roads by 2015.
"To keep the technology and jobs in Detroit, the candidate would extend tax credits and loan guarantees to U.S. automakers for retooling. And to sweeten the deal for consumers—think of the premium you have to cough up to purchase a Prius—Obama favors a $7,000 tax credit per plug-in vehicle," according to the Los Angeles Times. Thus, while some are spelling out doomsday scenarios for Detroit and other cities that depend heavily on the auto industry, these cities may yet make good investments if the auto companies can successfully adapt to the new demand for smaller, more fuel-efficient and even flex-fuel-capable cars.
But Obama wants to bring energy efficiency not just to Americans' driveways, but to their houses. "Obama and Biden will make a national commitment to weatherize at least one million low-income homes each year for the next decade, which can reduce energy usage across the economy and help moderate energy prices for all," according to Obama's website.
There are obviously myriad ways green investors can reap benefits from the New Energy for America plan posed by Obama. Venture capital investment in companies working on clean and alternative energy technologies is one way; venture capitalists invested $3.25 billion in clean and alternative energy comapnies in just the first half of this year alone. For smaller investors, or those who would want to minimize their risk through diversification, investing in green funds is an option; dozens of green funds and ETFs have emerged onto the scene in the past couple of years. And with the greening of America, so to speak, set to become even more widespread, there is almost no limit to the ways that investors could make green investments turn into, well, green.
Written by: Trista Winnie
Barack Obama, the 44th president of the United States, takes office in January. When Obama announced his candidacy in February 2007, the world was a different place; the war in Iraq was widely regarded as the key issue of the election.
What a difference an economic crisis makes.
The fallout of the subprime lending crisis took its toll and the U.S. economy fell into the deepest economic crisis in the country since the Great Depression, marked by skyrocketing foreclosure rates, widespread job losses, rising fuel, food and other consumer goods prices, stagnant wages, a record-breaking federal debt, a frozen credit market and extensive measures taken by the federal government to try to clean up the mess, most notably a $700 billion bailout bill and the seizure of Fannie Mae and Freddie Mac.
Thus, the economy quickly came to be the foremost issue in the minds of the American electorate; 63 percent of voters who took part in exit polls on election day said that the economy was their biggest concern, compared to the 2004 presidential election, when 18 percent of voters cited the economy as their biggest concern. And, because 80 percent of Americans believe the nation is on the wrong track, according to recent polling, "change" was the key word of this year's presidential campaign.
One of the Obama campaign's messages was that Obama represented a shift in economic policies compared to President George Bush and his administration. Obama's plans for energy and environmental policies represent another dramatic shift from those in place under the current president.
Though his ability to spend is likely to be hampered by the economic crisis to some degree, Obama has grand plans for boosting the economy, creating jobs and eventually ending America's oil addiction—particularly the country's addiction to foreign oil—by enacting his New Energy for America plan, which has multiple prongs for short-term to long-term benefit.
"Barack Obama’s green energy platform has gained him fans among that industry’s most powerful [people]—its investors," earth2tech reported. During the general election, investors backing cleantech companies donated six times more money to Obama than they did to his Republican opponent for the presidency, John McCain.
Obama's comprehensive energy plan entails putting $150 billion over 10 years into clean and alternative energies; he has also set an ambitious goal of bringing greenhouse gas emissions down to 80 percent below their 1990 levels by 2050; and he proposes managing out of control carbon emissions with a cap and trade system.
"Even though emissions limits are defined by the government, cap and trade is widely seen as a fair, market-driven way to, in Obama’s words, make 'dirty energy expensive,'" according to the Los Angeles Times. "Cap and trade auctions would channel $30 billion to $50 billion into public coffers annually, Obama estimates."
Pragmatism is a key to Obama's plan, which strives for a balance between maximum economic benefit and maximum environmental benefit; for example, the U.S. has extensive natural gas resources, so even though it is a fossil fuel rather than a renewable energy, Obama is in favor of drilling the Barnett Shale, a natural gas reserve near Arlington, Texas, as well as other drilling for natural gas in other places, and he has said he considers the construction of a natural gas pipeline in Alaska to be a priority. By 2012, Obama seeks to have 10 percent of the U.S. power supply come from renewable sources, after all, and 25 percent by 2025; the plan does not include trying to force the U.S. to go cold turkey on fossil fuels.
The plan does require the oil industry to use its resources more effectively, however. "Obama and [Vice President-Elect Joe] Biden will require oil companies to develop the 68 million acres of land (over 40 million of which are offshore) which they have already leased and are not drilling on," according to the Obama campaign's official website.
Oil and gas investments, then, could still be attractive to investors, even as the country will be making a shift toward renewable energy. Jobs will be created in areas around the country in places where natural gas and oil are present. But one of the most lucrative natural gas investments could simply be purchasing land with natural gas deposits underneath it; gas companies interested in the natural gas deposits pay leases and royalties for the rights to the natural gas. Some unsuspecting landowners have been ripped off by unscrupulous gas company employees and speculators, but savvy investors could look to retired dairy farmer Dewey Decker as an example: Decker negotiated with the gas companies and speculators who showed up and offered him $50 per acre, eventually signing a five-year contract in which he receives $2,411 per acre and royalties of 15 percent.
But, to help the U.S. reach that goal of deriving 10 percent of its energy from renewable sources in just four years, the Obama plan will offer incentives to those trying to get there and will see to it that the big oil industry is no longer so coddled by the federal government as it is now. For example, "Obama and Biden will enact a windfall profits tax on excessive oil company profits to give American families an immediate $1,000 emergency energy rebate to help families pay rising bills," according to Obama's website. "This relief would be a down payment on the Obama-Biden long-term plan to provide middle-class families with at least $1,000 per year in permanent tax relief."
Another sign of pragmatism is evidenced by the gradual tightening of standards on the struggling auto industry Obama plans, and the higher goals he has set. Concerned about their pocketbooks and their planet, consumers are shunning large cars and shifting toward smaller, more fuel-efficient cars. The industry has been slow to react, however, with the result that sales are dropping by nearly half for some; Obama's plan would require "raising car mileage standards 4 percent annually and would encourage to the auto industry to make all new vehicles flex-fuel-capable," according to the Los Angeles Times. Obama has also set a goal of having one million plug-in hybrid cars on America's roads by 2015.
"To keep the technology and jobs in Detroit, the candidate would extend tax credits and loan guarantees to U.S. automakers for retooling. And to sweeten the deal for consumers—think of the premium you have to cough up to purchase a Prius—Obama favors a $7,000 tax credit per plug-in vehicle," according to the Los Angeles Times. Thus, while some are spelling out doomsday scenarios for Detroit and other cities that depend heavily on the auto industry, these cities may yet make good investments if the auto companies can successfully adapt to the new demand for smaller, more fuel-efficient and even flex-fuel-capable cars.
But Obama wants to bring energy efficiency not just to Americans' driveways, but to their houses. "Obama and Biden will make a national commitment to weatherize at least one million low-income homes each year for the next decade, which can reduce energy usage across the economy and help moderate energy prices for all," according to Obama's website.
There are obviously myriad ways green investors can reap benefits from the New Energy for America plan posed by Obama. Venture capital investment in companies working on clean and alternative energy technologies is one way; venture capitalists invested $3.25 billion in clean and alternative energy comapnies in just the first half of this year alone. For smaller investors, or those who would want to minimize their risk through diversification, investing in green funds is an option; dozens of green funds and ETFs have emerged onto the scene in the past couple of years. And with the greening of America, so to speak, set to become even more widespread, there is almost no limit to the ways that investors could make green investments turn into, well, green.
Green Investing Gold Rush
As wealthy investors pour money into green investments, small investors flock to green funds, despite high volatility
Published on: Tuesday, September 02, 2008
Written by: Helen Kaiao Chang
The “green rush” is on. From large to small investors, the financial community is mining for green investments, making them one of the fastest-growing areas of the market.
Billionaires and millionaires are pouring trillions of dollars into green companies, while smaller investors are putting money into a slew of new green mutual funds and exchange-traded funds, or ETFs.
Green companies are dedicated to find alternative energy solutions, reducing carbon footprints and cleaning up the environment. The breadth and depth of money going into these companies is creating more viable investment opportunities for the market.
“Green investing has definitely taken root,” said Michael Herbst, analyst covering green funds at Morningstar, a leading investment research firm. “You have some very, very experienced, savvy, bottom line-oriented investors taking a pretty hard look at some of these opportunities and determining that they are attractive over the long haul.”
Green mutual funds can be as volatile as they are popularBut as with any gold rush, the risks can be high and the market volatile. Financial advisors caution that anyone venturing into this market better be prepared to stomach volatility and stick it out for the long term in order to realize strong returns.
“Most of the publicly-traded companies in this space are small and their share prices can be highly volatile,” said Steve Schueth (pronounced “sheeth”), president of First Affirmative Financial Network, an FCC-registered group of 120 advisors, which manages $700 million in socially-screened funds. “The innate nature of these kinds of investments requires a longer-term, well-diversified investment strategy.”
Billionaires and millionaires have started staking out claims in the green rush. Texas oil magnate T. Boone Pickens is investing $10 billion to build the world’s biggest wind farm. Bill Gates dropped $84 million in an ethanol company. Sun Microsystems co-founder and billionaire Vinod Khosla invested in cellulosic research.
Multi-millionaires worldwide are also panning for green. According to the World Wealth Report 2008, released by Capgemini and Merrill Lynch financial advisors, wealthy individuals have upped their investment in green industries. Total investment in the clean technology sector rose by 41 percent from 2005 to US$117 billion in 2007, the report said.
Wealthy individuals are devoting a greater portion of their portfolios to green industries. Globally, individuals with more than $1 million in assets put 12 percent of their portfolio in alternative energy investments, while individuals with more than $30 million put slight more at 14 percent, said the World Wealth Report.
In the U.S., high net-worth clients parked $39.5 billion in socially and environmentally-screened investments with management advisors in 2007, more than double the $17.3 billion managed in 2005. This is according to the 2007 Report on Socially Responsible Investing Trends, released by the Social Investment Forum.
Wealthy individuals have also invested in green companies through venture capital firms. Venture capitalists worldwide invested a whopping $3.25 billion in green energy companies in the first six months of 2008, according to the Cleantech Group, market researchers which track green energy investments. This is about a 50 percent increase over last year, which raised $3.9 billion for the entire year.
But the market is still young and investors will need patience to see returns. Morningstar’s Herbst noted that venture capitalists investing in the green sector “may not expect profits for five to seven years. So it is that longer term view that might be necessary for recognizing some of these opportunities.”
Smaller investors have also joined in the green rush, despite volatility. Morningstar tracks 38 green funds and ETFs, valued at about $7.5 trillion as of August 25 this year. Among these, nearly two-thirds, or 22 funds and ETFs, were launched within the last two years, including seven this year alone.
Analyst Herbst said he attributes this growth to media attention on green issues, as well as market opportunity. “It’s not surprising for us to see a number of new product launches where there is perceived opportunities,” he said.
Yet, most of these green funds have had extremely volatile performance, many rising by some 50 percent annually in the last two years, only to sink as much as 30 percent this year to August 25. In contrast, the S&P 500 was down about 12 percent by the same date this year.
First Affirmative’s Schueth recommends that investors diversify and take a long-term view. He advises clients to not allot more than 7 percent of their total portfolio—or 10 percent if they have very deep pockets—to green funds. He also suggests that green stock investors plan to park their money for at least five years. “People with short-term perspectives are not really investing, just gaming,” he said.
Despite all the volatility, the green energy sector could be here to stay. “There are organizations that are dedicating pretty meaningful research resources to this area, and thus could have some staying power,” said Morningstar’s Herbst.
For more info about the green movement's impact on venture capital investment, see our article Clean Technology "Boom"? and the accompanying data chart.
Published on: Tuesday, September 02, 2008
Written by: Helen Kaiao Chang
The “green rush” is on. From large to small investors, the financial community is mining for green investments, making them one of the fastest-growing areas of the market.
Billionaires and millionaires are pouring trillions of dollars into green companies, while smaller investors are putting money into a slew of new green mutual funds and exchange-traded funds, or ETFs.
Green companies are dedicated to find alternative energy solutions, reducing carbon footprints and cleaning up the environment. The breadth and depth of money going into these companies is creating more viable investment opportunities for the market.
“Green investing has definitely taken root,” said Michael Herbst, analyst covering green funds at Morningstar, a leading investment research firm. “You have some very, very experienced, savvy, bottom line-oriented investors taking a pretty hard look at some of these opportunities and determining that they are attractive over the long haul.”
Green mutual funds can be as volatile as they are popularBut as with any gold rush, the risks can be high and the market volatile. Financial advisors caution that anyone venturing into this market better be prepared to stomach volatility and stick it out for the long term in order to realize strong returns.
“Most of the publicly-traded companies in this space are small and their share prices can be highly volatile,” said Steve Schueth (pronounced “sheeth”), president of First Affirmative Financial Network, an FCC-registered group of 120 advisors, which manages $700 million in socially-screened funds. “The innate nature of these kinds of investments requires a longer-term, well-diversified investment strategy.”
Billionaires and millionaires have started staking out claims in the green rush. Texas oil magnate T. Boone Pickens is investing $10 billion to build the world’s biggest wind farm. Bill Gates dropped $84 million in an ethanol company. Sun Microsystems co-founder and billionaire Vinod Khosla invested in cellulosic research.
Multi-millionaires worldwide are also panning for green. According to the World Wealth Report 2008, released by Capgemini and Merrill Lynch financial advisors, wealthy individuals have upped their investment in green industries. Total investment in the clean technology sector rose by 41 percent from 2005 to US$117 billion in 2007, the report said.
Wealthy individuals are devoting a greater portion of their portfolios to green industries. Globally, individuals with more than $1 million in assets put 12 percent of their portfolio in alternative energy investments, while individuals with more than $30 million put slight more at 14 percent, said the World Wealth Report.
In the U.S., high net-worth clients parked $39.5 billion in socially and environmentally-screened investments with management advisors in 2007, more than double the $17.3 billion managed in 2005. This is according to the 2007 Report on Socially Responsible Investing Trends, released by the Social Investment Forum.
Wealthy individuals have also invested in green companies through venture capital firms. Venture capitalists worldwide invested a whopping $3.25 billion in green energy companies in the first six months of 2008, according to the Cleantech Group, market researchers which track green energy investments. This is about a 50 percent increase over last year, which raised $3.9 billion for the entire year.
But the market is still young and investors will need patience to see returns. Morningstar’s Herbst noted that venture capitalists investing in the green sector “may not expect profits for five to seven years. So it is that longer term view that might be necessary for recognizing some of these opportunities.”
Smaller investors have also joined in the green rush, despite volatility. Morningstar tracks 38 green funds and ETFs, valued at about $7.5 trillion as of August 25 this year. Among these, nearly two-thirds, or 22 funds and ETFs, were launched within the last two years, including seven this year alone.
Analyst Herbst said he attributes this growth to media attention on green issues, as well as market opportunity. “It’s not surprising for us to see a number of new product launches where there is perceived opportunities,” he said.
Yet, most of these green funds have had extremely volatile performance, many rising by some 50 percent annually in the last two years, only to sink as much as 30 percent this year to August 25. In contrast, the S&P 500 was down about 12 percent by the same date this year.
First Affirmative’s Schueth recommends that investors diversify and take a long-term view. He advises clients to not allot more than 7 percent of their total portfolio—or 10 percent if they have very deep pockets—to green funds. He also suggests that green stock investors plan to park their money for at least five years. “People with short-term perspectives are not really investing, just gaming,” he said.
Despite all the volatility, the green energy sector could be here to stay. “There are organizations that are dedicating pretty meaningful research resources to this area, and thus could have some staying power,” said Morningstar’s Herbst.
For more info about the green movement's impact on venture capital investment, see our article Clean Technology "Boom"? and the accompanying data chart.
Top 7 Rules for Investing in Green Funds
Green funds offer great potential returns, but investors need to manage them wisely
Published on: Friday, September 26, 2008
Written by: Helen Kaiao Chang
Every time gas prices go up, more investors pile into green funds. Every time environmental issues heat up, so do the number of green funds. And as the number of green companies increase, so do the dollars in green funds.
“Green funds tend to be focused on companies of the future,” said Steve Schueth, president, First Affirmative Financial Network, which specializes in socially responsible investments. “They’re popping up like mushrooms after a morning rainstorm.”
Investors are also popping up like mushrooms, pouring trillions of dollars into green funds. As the demand for alternative fuels and clean technology grows, the potential for return continues to grow. But the green market is young and volatile, said investment experts, and investors need to manage their investments wisely in order to realize returns.
“They’ll need the stomach to pass the dramatic swings in performance and keep a longer term view,” said Michael Herbst, an analyst covering green funds at Morningstar, a leading investment research firm. Morningstar has 38 green funds in its database.
Green companies are involved in helping the environment by creating alternative energy sources, such as wind, solar or thermal. Or they might be involved in cleaning up carbon footprints. Or they might lead their industries in producing goods and services in energy-efficient ways.
These are the seven rules for investing in green funds:
Knowledgeable brokers are invaluable in a growing marketRule #1 - Choose a good broker
You can choose a professional investment advisor or you can do it yourself. If you choose a broker, find someone who is experienced in green stocks and who is committed to its values.
Some Web sites post directories of green fund advisors. First Affirmative Financial Network, at firstaffirmative.com, lists 120 socially-responsible investment advisors nationwide. The Social Investment Forum, at socialinvest.org, posts 250 advisors. Other mainstream investment firms—such as Merrill Lynch, Credit Suisse and Morgan Stanley—now also offer socially-responsible investing funds as part of their general investment instruments. But their experience with green funds is limited.
If you decide to be your own broker, make sure you do lots of research.
Rule #2 - Know your investment values
Are there certain types of companies that you want to avoid? For instance, some investors avoid companies that sell tobacco, alcohol, military equipment or nuclear energy. Conversely, what types of companies do you want to support? Some investors prefer companies that help the environment, as well as have good management practices.
For example, Wal-Mart has some very progressive policies in terms of saving energy, but some investors question their employee benefits. Corporate monolith GE is involved in wind and thermal energy, but is also developing nuclear energy, which some investors object to.
You need to determine what is acceptable or not acceptable to you.
Rule #3 - Understand the funds
Investors also need to look carefully at products before putting in money. This includes understanding the fund’s parent company, investment goals, track record and criteria, said Schueth. “Due diligence on these new products is really critically important...to realize whether you’re being ‘greenwashed’ or not.”
You also want to understand the breadth and width of a fund. A “pure” energy fund might focus on one market sector, such as water-energy companies. A broad-based fund might include large companies that are industry leaders in green practices. For example, 3M—which makes Sticky Notes—is not considered a “green” company, but it has significantly improved its energy efficiency in the last decade, making it a “best-in-class” leader.
Investors also want to understand the fund type. Green funds are either mutual funds or exchange-traded funds, called ETFs. Mutual funds are baskets of stocks, chosen by money managers, with fixed share prices at the end of each trading day. ETFs are stock selections based on indexes and can trade anytime, making them cheaper and more flexible.
You can find out more about different funds at investment research sites, such as Morningstar.com, Socialfunds.com, and Yahoo! Finance.
Risk tolerance is a main consideration in a young marketRule #4 - Know your risk tolerance
Your risk tolerance level will determine how much weight to put in your various portfolio holdings. Younger investors, with decades of working years ahead, tend to have higher risk tolerance. Older investors, who may need more income, generally have lower risk tolerance.
If you have high tolerance, you will want an aggressive portfolio with more U.S. and international stocks and no bonds. This might consist of 73 percent U.S. stocks, 24 percent international and three percent short-term liquid investments, according to Earthfolio.net, which offers a risk tolerance test.
If you have low risk tolerance, you will prefer something with more blue-chip US stocks and bonds. A conservative portfolio might consist of 42 percent short-term liquid investments, 29 percent bonds, 24 percent U.S. stocks and 5 percent international stocks, according to Earthfolio.net.
Green funds can fit into any of those asset areas—U.S., international, blue-chip, small-cap, stocks or bonds. “Asset allocation is going to determine 70 percent to 90 percent of performance,” said Arturo Tabuenco, founder, Blue Marble Investments, which runs Earthfolio.net. “Because it’s green or not doesn’t make a difference.”
Rule #5 - Limit your allocation
Many green companies are still new and small, with unpredictable profits. If one company goes bankrupt, it can drag down an entire fund. Therefore, financial advisors say to limit the amount you invest in green funds.
First Affirmative’s Schueth recommends that most investors not put more than 7 percent of their total portfolio—or 10 percent for extremely wealthy investors—into green funds.
“The idea of being too concentrated in a relatively new, highly-volatile, fairly small-cap area is not something most people should be doing,” said Schueth.
Rule #6 - Be prepared for volatility
Green funds can typically be as high or low as much as 50 to 130 percent a year. The Dow Jones World Solar Energy ETF was up by nearly 135 percent in 2007 and down nearly 16 percent as of August 25 this year. The WilderHill Clean Energy ETF was up 58 percent last year and down nearly 31 percent as of August 25 this year.
Even in a volatile market, long-term planning is bestIn contrast, the S&P 500 was up 5 percent in 2007, and down 12 percent by Aug 25 this year, according to Morningstar.
Some funds simply evaporate. One fund, ThinkGreen by ThinkCapital, was launched in April this year and liquidated in August.
“Performance for these funds is likely to remain volatile and unpredictable,” said Morningstar’s Herbst. “Investors (should) view them as specialty holdings, rather than core holdings.”
Rule #7 - Stay for the long term
Investment advisors said to plan to invest for at least five years. In a volatile market, this timeframe is needed to see healthy returns.
With volatile stocks, “Many investors tend to buy high and sell low, which is essentially the opposite of what they should be doing,” said analyst Herbst. He noted that many green fund investors got in at the market height in fall 2007, and then sold in January this year, when many funds dropped 20 percent. These investors “actually captured the entire loss and missed out on any potential rebound and eventual gains those funds may very well have in the future,” he said.
Herbst notes that many wealthy investors in the green space plan on five- to seven-year holdings. “Some of these opportunities will only be realized in the long term,” he said.
First Affirmative’s Schueth advises clients to stay at least five years. “In our opinion, that’s the only way to invest,” he said.
Several of these rules apply to any good portfolio. But they become more acute when investing in green funds, which are relatively young. Like tech stocks of the late 90s, green funds have the potential for great returns, as well as great losses. “Let the buyer beware,” said analyst Herbst.
For a listing of green mutual funds and green ETFs, see our chart: Green Mutual Funds and ETFs. For more information, read our previous articles: Clean Technology "Boom?" and Green Investing Gold Rush.
Published on: Friday, September 26, 2008
Written by: Helen Kaiao Chang
Every time gas prices go up, more investors pile into green funds. Every time environmental issues heat up, so do the number of green funds. And as the number of green companies increase, so do the dollars in green funds.
“Green funds tend to be focused on companies of the future,” said Steve Schueth, president, First Affirmative Financial Network, which specializes in socially responsible investments. “They’re popping up like mushrooms after a morning rainstorm.”
Investors are also popping up like mushrooms, pouring trillions of dollars into green funds. As the demand for alternative fuels and clean technology grows, the potential for return continues to grow. But the green market is young and volatile, said investment experts, and investors need to manage their investments wisely in order to realize returns.
“They’ll need the stomach to pass the dramatic swings in performance and keep a longer term view,” said Michael Herbst, an analyst covering green funds at Morningstar, a leading investment research firm. Morningstar has 38 green funds in its database.
Green companies are involved in helping the environment by creating alternative energy sources, such as wind, solar or thermal. Or they might be involved in cleaning up carbon footprints. Or they might lead their industries in producing goods and services in energy-efficient ways.
These are the seven rules for investing in green funds:
Knowledgeable brokers are invaluable in a growing marketRule #1 - Choose a good broker
You can choose a professional investment advisor or you can do it yourself. If you choose a broker, find someone who is experienced in green stocks and who is committed to its values.
Some Web sites post directories of green fund advisors. First Affirmative Financial Network, at firstaffirmative.com, lists 120 socially-responsible investment advisors nationwide. The Social Investment Forum, at socialinvest.org, posts 250 advisors. Other mainstream investment firms—such as Merrill Lynch, Credit Suisse and Morgan Stanley—now also offer socially-responsible investing funds as part of their general investment instruments. But their experience with green funds is limited.
If you decide to be your own broker, make sure you do lots of research.
Rule #2 - Know your investment values
Are there certain types of companies that you want to avoid? For instance, some investors avoid companies that sell tobacco, alcohol, military equipment or nuclear energy. Conversely, what types of companies do you want to support? Some investors prefer companies that help the environment, as well as have good management practices.
For example, Wal-Mart has some very progressive policies in terms of saving energy, but some investors question their employee benefits. Corporate monolith GE is involved in wind and thermal energy, but is also developing nuclear energy, which some investors object to.
You need to determine what is acceptable or not acceptable to you.
Rule #3 - Understand the funds
Investors also need to look carefully at products before putting in money. This includes understanding the fund’s parent company, investment goals, track record and criteria, said Schueth. “Due diligence on these new products is really critically important...to realize whether you’re being ‘greenwashed’ or not.”
You also want to understand the breadth and width of a fund. A “pure” energy fund might focus on one market sector, such as water-energy companies. A broad-based fund might include large companies that are industry leaders in green practices. For example, 3M—which makes Sticky Notes—is not considered a “green” company, but it has significantly improved its energy efficiency in the last decade, making it a “best-in-class” leader.
Investors also want to understand the fund type. Green funds are either mutual funds or exchange-traded funds, called ETFs. Mutual funds are baskets of stocks, chosen by money managers, with fixed share prices at the end of each trading day. ETFs are stock selections based on indexes and can trade anytime, making them cheaper and more flexible.
You can find out more about different funds at investment research sites, such as Morningstar.com, Socialfunds.com, and Yahoo! Finance.
Risk tolerance is a main consideration in a young marketRule #4 - Know your risk tolerance
Your risk tolerance level will determine how much weight to put in your various portfolio holdings. Younger investors, with decades of working years ahead, tend to have higher risk tolerance. Older investors, who may need more income, generally have lower risk tolerance.
If you have high tolerance, you will want an aggressive portfolio with more U.S. and international stocks and no bonds. This might consist of 73 percent U.S. stocks, 24 percent international and three percent short-term liquid investments, according to Earthfolio.net, which offers a risk tolerance test.
If you have low risk tolerance, you will prefer something with more blue-chip US stocks and bonds. A conservative portfolio might consist of 42 percent short-term liquid investments, 29 percent bonds, 24 percent U.S. stocks and 5 percent international stocks, according to Earthfolio.net.
Green funds can fit into any of those asset areas—U.S., international, blue-chip, small-cap, stocks or bonds. “Asset allocation is going to determine 70 percent to 90 percent of performance,” said Arturo Tabuenco, founder, Blue Marble Investments, which runs Earthfolio.net. “Because it’s green or not doesn’t make a difference.”
Rule #5 - Limit your allocation
Many green companies are still new and small, with unpredictable profits. If one company goes bankrupt, it can drag down an entire fund. Therefore, financial advisors say to limit the amount you invest in green funds.
First Affirmative’s Schueth recommends that most investors not put more than 7 percent of their total portfolio—or 10 percent for extremely wealthy investors—into green funds.
“The idea of being too concentrated in a relatively new, highly-volatile, fairly small-cap area is not something most people should be doing,” said Schueth.
Rule #6 - Be prepared for volatility
Green funds can typically be as high or low as much as 50 to 130 percent a year. The Dow Jones World Solar Energy ETF was up by nearly 135 percent in 2007 and down nearly 16 percent as of August 25 this year. The WilderHill Clean Energy ETF was up 58 percent last year and down nearly 31 percent as of August 25 this year.
Even in a volatile market, long-term planning is bestIn contrast, the S&P 500 was up 5 percent in 2007, and down 12 percent by Aug 25 this year, according to Morningstar.
Some funds simply evaporate. One fund, ThinkGreen by ThinkCapital, was launched in April this year and liquidated in August.
“Performance for these funds is likely to remain volatile and unpredictable,” said Morningstar’s Herbst. “Investors (should) view them as specialty holdings, rather than core holdings.”
Rule #7 - Stay for the long term
Investment advisors said to plan to invest for at least five years. In a volatile market, this timeframe is needed to see healthy returns.
With volatile stocks, “Many investors tend to buy high and sell low, which is essentially the opposite of what they should be doing,” said analyst Herbst. He noted that many green fund investors got in at the market height in fall 2007, and then sold in January this year, when many funds dropped 20 percent. These investors “actually captured the entire loss and missed out on any potential rebound and eventual gains those funds may very well have in the future,” he said.
Herbst notes that many wealthy investors in the green space plan on five- to seven-year holdings. “Some of these opportunities will only be realized in the long term,” he said.
First Affirmative’s Schueth advises clients to stay at least five years. “In our opinion, that’s the only way to invest,” he said.
Several of these rules apply to any good portfolio. But they become more acute when investing in green funds, which are relatively young. Like tech stocks of the late 90s, green funds have the potential for great returns, as well as great losses. “Let the buyer beware,” said analyst Herbst.
For a listing of green mutual funds and green ETFs, see our chart: Green Mutual Funds and ETFs. For more information, read our previous articles: Clean Technology "Boom?" and Green Investing Gold Rush.
Biggest steelmaker sets up "green" funds
Bloomberg NewsPublished: July 11, 2008
ArcelorMittal, the world's biggest steelmaker, set up two funds to invest in so-called clean-energy technology like solar power to help it meet European Union rules on cutting emissions of greenhouse gases.
The company's venture capital fund will invest $20 million in the U.S. solar panel developer Miasole, the Luxembourg-based steelmaker said Friday in an e-mailed statement. Its carbon fund will have an initial €100 million, or $158 million, to invest in renewable energy and greenhouse-gas reducing technologies.
Steelmakers are seeking cleaner sources of energy to comply with government policies to curb climate change. The 27-nation EU aims to cut greenhouse-gas emissions by 21 percent in the 15 years from 2005. ArcelorMittal will work with venture capital firms including Bessemer Venture Partners and Khosla Ventures.
ArcelorMittal, the world's biggest steelmaker, set up two funds to invest in so-called clean-energy technology like solar power to help it meet European Union rules on cutting emissions of greenhouse gases.
The company's venture capital fund will invest $20 million in the U.S. solar panel developer Miasole, the Luxembourg-based steelmaker said Friday in an e-mailed statement. Its carbon fund will have an initial €100 million, or $158 million, to invest in renewable energy and greenhouse-gas reducing technologies.
Steelmakers are seeking cleaner sources of energy to comply with government policies to curb climate change. The 27-nation EU aims to cut greenhouse-gas emissions by 21 percent in the 15 years from 2005. ArcelorMittal will work with venture capital firms including Bessemer Venture Partners and Khosla Ventures.
Why Alternative Energy and Green Funds are Underperforming
For the Year They're the Worst Among Socially Responsible Mutual Funds
By William Donovan, About.com
A rising tide may lift all boats, but an economic tsunami swamps them. That certainly has been the case this year for mutual funds in the green and alternative energy sector. The combination of the credit crunch and the dive in oil prices has meant a swift turnaround for a segment of stocks that was flying high just three months ago.
According to Morningstar Inc., on a total-return, year-to-date-basis through Oct. 31, the eight worst performing mutual funds among the 152 funds in its socially responsible investing group were all green funds. The Guinness Atkinson Alternative Energy Fund was down the most, off 64.25 percent through October. It was followed by the Calvert Global Alternative Energy Fund, down 60.07 percent and the Winslow Green Growth Fund, down 59.39 percent. They compare with the best performing SRI fund, the CRA Qualified Investment Fund, which managed a gain of 1.89 percent through October.
“It’s incredibly galling to have a fund that’s down 60 percent for the year, but you take the rough with the smooth,” said Edward Guinness, manager of the Guinness Atkinson Alternative Energy Fund, from his office in London. “The energy sector has always been highly volatile and the alternative energy sector is going to be moreso.”
While these funds have been dragged down by the overall market collapse, they also have their own unique burdens:
Oil is down and so is the urgency.
When the price of oil was climbing earlier this year, there was an equal surge in interest in solar, wind and hydro power. But as the cost of a barrel of oil has fallen from a peak of about $145 in July to below $60, so has the urgency to find alternatives.
“There’s been a very dramatic correction in renewable energy stocks and energy conservation plays,” says Matthew Patsky, a fund manager with Winslow Green Mutual Funds. “Part of it is directly correlated to the reversal in fossil fuel prices.”
Take Vestas, for example, the Danish wind energy company. Fluctuations in its shares have tracked oil. After oil topped out in mid-July, shares of Vestas hit their high in mid-August at about $119 per. As oil fell, so did Vestas. By late November it was trading at around $33 per share.
The credit crunch has created uncertainty.
Unlike the early 1990s when there was a bubble in the emerging alternative energy market, today’s industry is more mature. Analysts say companies have orders in the pipeline and contracts in place. But as with other sectors, investors are waiting for the banks to start making loans again.
This has been a particular problem for alternative energy stocks, who often sell themselves as long-term investments to hedge against an eventual world oil shortage. With markets around the globe in the midst of an historic freefall, attention has centered on daily triple movements and not company prospects years ahead.
“The global markets shut off because of lack of credit starting in mid-September,” says Patsky. “There’s still plenty of business going on with people completing projects that are in progress or that they had already lined-up financing for. But what about the future.”
Green funds are suffering as growth stocks.
Green funds are typically made up of smaller companies whose revenues have the potential to grow at a rapid pace. Investors are willing to pay more in terms of share price for that growth potential, rather than buying more stable companies growing at slower rates. With many economists saying we’re in a global recession, it has become much more difficult to estimate those accelerated earnings. That lack of confidence has meant a pull back from growth stocks.
“We’ve seen a huge number of stocks that have very exciting long term potential trading under 10 times earnings,” says Guinness, who said that figure was above 20 for many stocks earlier in the year. “People are thinking about what will happen in the very near term and they don’t believe the earnings forecast numbers.”
Among the other funds in the bottom eight were the Allianz RCM Global Economic Trends Fund, Winslow Green Solutions Fund, Robeco SAM Sustainable Climate Institutional Fund, New Alternatives Fund and DWS Climate Change Fund. All were off between 54.8 percent to 48.92 percent for the year through October.
While recognizing their funds have been hammered, both Guinness and Patsky believe there are many positive reasons to invest in green funds for long term investors. They include the climate crisis, energy security and projections that the world is headed for a shortage in oil in the not-to-distant future.
“We take the view that the next six months will have presented, in hindsight, an incredible buying opportunity,” says Guinness. “Is today the right day or is the right day in three months time? I really don’t know. But whether you end up buying today or in three months or six months, it will probably prove to be a good time to have bought.”
By William Donovan, About.com
A rising tide may lift all boats, but an economic tsunami swamps them. That certainly has been the case this year for mutual funds in the green and alternative energy sector. The combination of the credit crunch and the dive in oil prices has meant a swift turnaround for a segment of stocks that was flying high just three months ago.
According to Morningstar Inc., on a total-return, year-to-date-basis through Oct. 31, the eight worst performing mutual funds among the 152 funds in its socially responsible investing group were all green funds. The Guinness Atkinson Alternative Energy Fund was down the most, off 64.25 percent through October. It was followed by the Calvert Global Alternative Energy Fund, down 60.07 percent and the Winslow Green Growth Fund, down 59.39 percent. They compare with the best performing SRI fund, the CRA Qualified Investment Fund, which managed a gain of 1.89 percent through October.
“It’s incredibly galling to have a fund that’s down 60 percent for the year, but you take the rough with the smooth,” said Edward Guinness, manager of the Guinness Atkinson Alternative Energy Fund, from his office in London. “The energy sector has always been highly volatile and the alternative energy sector is going to be moreso.”
While these funds have been dragged down by the overall market collapse, they also have their own unique burdens:
Oil is down and so is the urgency.
When the price of oil was climbing earlier this year, there was an equal surge in interest in solar, wind and hydro power. But as the cost of a barrel of oil has fallen from a peak of about $145 in July to below $60, so has the urgency to find alternatives.
“There’s been a very dramatic correction in renewable energy stocks and energy conservation plays,” says Matthew Patsky, a fund manager with Winslow Green Mutual Funds. “Part of it is directly correlated to the reversal in fossil fuel prices.”
Take Vestas, for example, the Danish wind energy company. Fluctuations in its shares have tracked oil. After oil topped out in mid-July, shares of Vestas hit their high in mid-August at about $119 per. As oil fell, so did Vestas. By late November it was trading at around $33 per share.
The credit crunch has created uncertainty.
Unlike the early 1990s when there was a bubble in the emerging alternative energy market, today’s industry is more mature. Analysts say companies have orders in the pipeline and contracts in place. But as with other sectors, investors are waiting for the banks to start making loans again.
This has been a particular problem for alternative energy stocks, who often sell themselves as long-term investments to hedge against an eventual world oil shortage. With markets around the globe in the midst of an historic freefall, attention has centered on daily triple movements and not company prospects years ahead.
“The global markets shut off because of lack of credit starting in mid-September,” says Patsky. “There’s still plenty of business going on with people completing projects that are in progress or that they had already lined-up financing for. But what about the future.”
Green funds are suffering as growth stocks.
Green funds are typically made up of smaller companies whose revenues have the potential to grow at a rapid pace. Investors are willing to pay more in terms of share price for that growth potential, rather than buying more stable companies growing at slower rates. With many economists saying we’re in a global recession, it has become much more difficult to estimate those accelerated earnings. That lack of confidence has meant a pull back from growth stocks.
“We’ve seen a huge number of stocks that have very exciting long term potential trading under 10 times earnings,” says Guinness, who said that figure was above 20 for many stocks earlier in the year. “People are thinking about what will happen in the very near term and they don’t believe the earnings forecast numbers.”
Among the other funds in the bottom eight were the Allianz RCM Global Economic Trends Fund, Winslow Green Solutions Fund, Robeco SAM Sustainable Climate Institutional Fund, New Alternatives Fund and DWS Climate Change Fund. All were off between 54.8 percent to 48.92 percent for the year through October.
While recognizing their funds have been hammered, both Guinness and Patsky believe there are many positive reasons to invest in green funds for long term investors. They include the climate crisis, energy security and projections that the world is headed for a shortage in oil in the not-to-distant future.
“We take the view that the next six months will have presented, in hindsight, an incredible buying opportunity,” says Guinness. “Is today the right day or is the right day in three months time? I really don’t know. But whether you end up buying today or in three months or six months, it will probably prove to be a good time to have bought.”
Climate Change:
www.ethicalcorp.com - 15 Dec 08
Investors wanting secure returns should dump oil and gas stocks and back green infrastructure funds, says HSBC’s climate chief
Financial markets “do not tell the economic truth and they do not tell the ecological truth”, says Nick Robins, head of HSBC’s Climate Change Centre of Excellence.
Robins estimates that just half of investors are taking any notice of carbon risk, the legislative and reputational risk posed by climate change. The same low proportion utilises resources such as the Carbon Disclosure Project, where companies report on their climate change strategy, he says.
The major contradiction in the markets, says Robins, is that “oil and gas companies are treated as if oil and gas are assets when, in reality, they are carbon liabilities”.
One old argument is that oil and gas will always be a safer investment, as long as renewable energy relies on shaky government subsidies to survive. But Robins does not buy it. “All forms of energy are supported by government subsidies,” he says, adding: “OECD countries support the oil industry to the tune of $310bn.”
Robins supports the International Energy Agency’s inquiry into how oil and gas subsidies could be reallocated to support the building of a green energy infrastructure. He says: “Last year the head of the IEA was saying a low-carbon economy was unachievable. This year the IEA released an energy report saying that a 50% emissions cut is possible by 2050.”
As the co-editor of a new book, Sustainable Investing: The Art of Long-Term Performance, Robins criticises the short-termism of modern financial markets. Institutional investors need to take a longer view than “one, two or three years ahead”, he says, if they are to nurture any kind of economic stability.
Following this year’s economic crash, the next five years are an opportunity to balance the needs of investors and the planet, Robins says. Investors need secure assets and the world needs investment in adaptation and mitigation to deal with climate change.
Robins expects a boom in government infrastructure investment over the next few years to boost the economy, and hopes governments will steer funds towards “environmental infrastructure” – or green buildings, and green energy sources.
Robins mentions the possibility of funding green infrastructure through corporate or government bonds and environment infrastructure funds. He singles out energy efficiency as the single biggest sustainable investment opportunity of our time.
“People talk about expensive things like carbon capture and storage and solar, but energy efficiency presents a secure revenue system for investors,” he says.
Robins criticises the lack of emphasis on energy efficiency in the EU energy package earlier this year. But as countries around the world react to the economic turmoil and look to cut costs, and as the US looks towards energy independence, Robins believes investors will soon set up “energy efficiency funds” in the US, China and India, dedicated to investments in efficiency service companies.
Investors wanting secure returns should dump oil and gas stocks and back green infrastructure funds, says HSBC’s climate chief
Financial markets “do not tell the economic truth and they do not tell the ecological truth”, says Nick Robins, head of HSBC’s Climate Change Centre of Excellence.
Robins estimates that just half of investors are taking any notice of carbon risk, the legislative and reputational risk posed by climate change. The same low proportion utilises resources such as the Carbon Disclosure Project, where companies report on their climate change strategy, he says.
The major contradiction in the markets, says Robins, is that “oil and gas companies are treated as if oil and gas are assets when, in reality, they are carbon liabilities”.
One old argument is that oil and gas will always be a safer investment, as long as renewable energy relies on shaky government subsidies to survive. But Robins does not buy it. “All forms of energy are supported by government subsidies,” he says, adding: “OECD countries support the oil industry to the tune of $310bn.”
Robins supports the International Energy Agency’s inquiry into how oil and gas subsidies could be reallocated to support the building of a green energy infrastructure. He says: “Last year the head of the IEA was saying a low-carbon economy was unachievable. This year the IEA released an energy report saying that a 50% emissions cut is possible by 2050.”
As the co-editor of a new book, Sustainable Investing: The Art of Long-Term Performance, Robins criticises the short-termism of modern financial markets. Institutional investors need to take a longer view than “one, two or three years ahead”, he says, if they are to nurture any kind of economic stability.
Following this year’s economic crash, the next five years are an opportunity to balance the needs of investors and the planet, Robins says. Investors need secure assets and the world needs investment in adaptation and mitigation to deal with climate change.
Robins expects a boom in government infrastructure investment over the next few years to boost the economy, and hopes governments will steer funds towards “environmental infrastructure” – or green buildings, and green energy sources.
Robins mentions the possibility of funding green infrastructure through corporate or government bonds and environment infrastructure funds. He singles out energy efficiency as the single biggest sustainable investment opportunity of our time.
“People talk about expensive things like carbon capture and storage and solar, but energy efficiency presents a secure revenue system for investors,” he says.
Robins criticises the lack of emphasis on energy efficiency in the EU energy package earlier this year. But as countries around the world react to the economic turmoil and look to cut costs, and as the US looks towards energy independence, Robins believes investors will soon set up “energy efficiency funds” in the US, China and India, dedicated to investments in efficiency service companies.
A List of Green Funds
www.tropical-rainforest-animals.com
Below we provide a list of green funds which offer genuine green investment opportunities for environmentally aware investors.
Photo: Piero While discussing just what exactly green funds are, we pointed out that there are many socially responsible funds which may also incorporate investments in green industries.
The following is a list of some green mutual funds which almost exlusively invest in environmentally active industries. In other words, such industries & companies are actively developing solutions to major environmental issues.
By far the most important industry which green funds invest their money in is the renewable energy. But there are, of course, other ones which draw their attention as well.
Acuity Clean Environment Equity Fund (1)
Alternative energy & power solutions incl.:
Wind
Solar
Biofuel
Energy efficiency
Waste management & pollution control
Water & waste solutions incl.:
Water purification
Waste water treatment
Desalination
Environment Health & Safety incl.:
Development of drugs and vaccines
Health services
Sanitation technologies
Calvert Global Alternative Energy Fund (2)
Wind
Solar
Biomass
Geothermal
Fuel cells
Energy efficiency
Utilities
Green Effects Fund (3)
Wind
Solar
Waste Management
Energy Efficiency
Guinness Atkinson Alternative Energy Fund (4)
Solar
Wind
Geothermal
Hydro
Energy Efficiency
Biomass & biofuels
Impax Environmental Leaders Fund (5)
Alternative Energy & Energy Efficiency, incl.:
Wind turbine manufacturers
Solar manufacturers and integrators
Renewable energy developers and independent power producers
Biofuels
Meters and demand side management
Industrial, building & transport energy efficiency
Waste Treatment & Pollution Control
Waste Technologies & Resource Management
New Alternatives Fund (6)
Wind
Solar
Geothermal
Biomass
Hydro
Fuel cells
Ocean energy
Energy conservation
Winslow Green Growth Fund (7)
Clean Energy
Green Building
Environmental Services
Resource Efficiency
Water Management
Green Transport
Below we provide a list of green funds which offer genuine green investment opportunities for environmentally aware investors.
Photo: Piero While discussing just what exactly green funds are, we pointed out that there are many socially responsible funds which may also incorporate investments in green industries.
The following is a list of some green mutual funds which almost exlusively invest in environmentally active industries. In other words, such industries & companies are actively developing solutions to major environmental issues.
By far the most important industry which green funds invest their money in is the renewable energy. But there are, of course, other ones which draw their attention as well.
Acuity Clean Environment Equity Fund (1)
Alternative energy & power solutions incl.:
Wind
Solar
Biofuel
Energy efficiency
Waste management & pollution control
Water & waste solutions incl.:
Water purification
Waste water treatment
Desalination
Environment Health & Safety incl.:
Development of drugs and vaccines
Health services
Sanitation technologies
Calvert Global Alternative Energy Fund (2)
Wind
Solar
Biomass
Geothermal
Fuel cells
Energy efficiency
Utilities
Green Effects Fund (3)
Wind
Solar
Waste Management
Energy Efficiency
Guinness Atkinson Alternative Energy Fund (4)
Solar
Wind
Geothermal
Hydro
Energy Efficiency
Biomass & biofuels
Impax Environmental Leaders Fund (5)
Alternative Energy & Energy Efficiency, incl.:
Wind turbine manufacturers
Solar manufacturers and integrators
Renewable energy developers and independent power producers
Biofuels
Meters and demand side management
Industrial, building & transport energy efficiency
Waste Treatment & Pollution Control
Waste Technologies & Resource Management
New Alternatives Fund (6)
Wind
Solar
Geothermal
Biomass
Hydro
Fuel cells
Ocean energy
Energy conservation
Winslow Green Growth Fund (7)
Clean Energy
Green Building
Environmental Services
Resource Efficiency
Water Management
Green Transport
Green Funds Remain Hot in Cooling Economy
Investors are still keen to buy stocks and funds that are ecologically friendly
By Barbara Juncosa
Even though U.S. financial markets have cooled in 2008, investments in “clean technology” from firms such as Silicon Valley–based Khosla Ventures have remained hot. Clean technology—products and services that harness renewable resources and limit environmental impacts—has emerged as one of the top three asset classes for venture capitalists. “The past five years have seen significant increases in interest and investment in this area,” says Ron Pernick, co-author of The Clean Tech Revolution. Venture capital totaled $2 billion in the second quarter of 2008—a new record—and was up 48 percent from the first quarter despite the economic downturn.
The market’s large size and its potential for addressing important global challenges will continue to drive investments, according to Samir Kaul, a founding partner at Khosla Ventures, one of the top five clean-tech investors. Utility-scale solar power plants and second-generation biofuels such as algae have led the field in recent financing rounds, but funding is now branching into less developed technologies such as bioplastics, green building materials and water desalination.
Note: This story was originally published with the title, "Green Funds Remain Hot".
By Barbara Juncosa
Even though U.S. financial markets have cooled in 2008, investments in “clean technology” from firms such as Silicon Valley–based Khosla Ventures have remained hot. Clean technology—products and services that harness renewable resources and limit environmental impacts—has emerged as one of the top three asset classes for venture capitalists. “The past five years have seen significant increases in interest and investment in this area,” says Ron Pernick, co-author of The Clean Tech Revolution. Venture capital totaled $2 billion in the second quarter of 2008—a new record—and was up 48 percent from the first quarter despite the economic downturn.
The market’s large size and its potential for addressing important global challenges will continue to drive investments, according to Samir Kaul, a founding partner at Khosla Ventures, one of the top five clean-tech investors. Utility-scale solar power plants and second-generation biofuels such as algae have led the field in recent financing rounds, but funding is now branching into less developed technologies such as bioplastics, green building materials and water desalination.
Note: This story was originally published with the title, "Green Funds Remain Hot".
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