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Rona Fried, Ph.D., is editor of Progressive Investor and CEO of SustainableBusiness.com. Known for her wide-ranging, deep knowledge of sustainable business, she speaks and writes on topics related to green business, green jobs and green investing. She writes the "Investing in Clean... More
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  • Green Investment Trends for 2009 0 comments
    Apr 8, 2009 10:55 AM | about stocks: FSLR, VWSYF, ORA, IBM, ITRI, ENOC, OC, BEZ, ICFI, TTEK, NWPX

    Now that the stock market is showing signs of life again, green investors, who saw their portfolios sink even lower than the overall market, are benefiting from holding on. Unlike the mass of investors, who sold at the bottom of the market, green investors are taking a long term view.

    Green business, especially clean energy and energy efficiency, but also green building, water, and recycling, will be among the greatest growth stories over the next several decades. In many cases, the stocks sold off, not because of fundamentals, but because institutional investors and hedge funds were forced to liquidate holdings during the stock market crash.

    Green stocks have already bounced back more than the overall market. When the market was up 21% last month, green stocks rose 30%.

    Every year, Progressive Investor, our green investment newsletter, produces a report that covers a sector of the green investment landscape. Over the years, we’ve produced reports on investing in solar, wind, micro-fuel cells, recycling and water. This year, because of market conditions, we took a different approach and reviewed the state of the industry in the State of Green Investing 2009 report we recently released.

    To produce the report, we talked with a wide range of green industry players: green mutual fund and ETF portfolio managers, venture capital firms, and groups that were involved in drafting the Cleantech portion of the US stimulus plan. We also looked at cleantech provisions in stimulus plans around the world.  

    All the green analysts we spoke with to produce the report told us that even in the darkest moments of the market over the past few months, most investors did not sell their holdings. During a period of the most extreme withdrawals from U.S. mutual funds - 10 times the typical amounts – green mutual funds and ETFs saw little outflow. Since the beginning of the year, investors have been buying into these funds.
    Says Rob Wilder, founder of the bellweather Powershares WilderHill Clean Energy ETF (NYSEARCA:PBW), “They are hanging on, knowing there's a bright light at the end of the tunnel.” 

    "People I work with are more optimistic than I've seen in years,” notes Sam Jones, portfolio manager of the New Power Portfolio. “The stimulus plan is a big piece of it - they finally feel they have backing. They've been swimming against the tide for a long time."

    Clean energy and efficiency comprise about 14% of the American Recovery & Reinvestment Act of 2009. "All the elements we advocated for are in the plan," says Elena Foshay of the Apollo Alliance, a key group involved in developing the cleantech provisions. About $200 billion in recovery plans around the world has been allotted for cleantech.

    A survey of institutional investors representing over $1 trillion in assets, found that 49% are "more likely" or "much more likely" to increase their exposure to clean energy now than they were a year ago. Another 46% said their intentions haven't changed, and just 5% said they're "less likely" or "much less likely" to invest more in clean energy.

    The optimism professional investors show in this survey demonstrates that despite the financial crisis and economic recession, investment momentum is growing to bridge the financing gap
    - institutional investors provide crucial long-term global financing for industries that mitigate climate change.  (Survey conducted by New Energy Finance and DB Climate Change Advisors, Deutsche Bank's climate change investment business).

    Progressive Investor identified the following markers for green investment trends for 2009: 

    • Credit is already loosening up for clean energy projects in the US and Germany. Utility scale projects will likely drive growth beginning in the second quarter of 2009. Project financing hasn’t stopped, but has become less predictable, slower and more expensive. 
    • Green venture capital firms with a strong track record are able to raise funds, albeit more slowly. Those that raised funds before the crash have their pick of strong candidates at lower valuations.
    • Worldwide, over $200 billion in incentives and spending for renewable energy, energy efficient buildings, smart grid and clean transportation is evident in stimulus bills across the world. Industry insiders expect the cleantech industry alone to create at least 2 million jobs in the U.S.
    • The latest data from NASA shows unprecedented global warming in 2008, exceeding even the most conservative climate model projections. 2000 scientists at a March conference in Copenhagen warned policy-makers to “vigorously” implement policies. Research shows that even the most stringent greenhouse gas reduction targets can benefit the economy, rather than hurt it.
    • The big question for many years has been whether companies that make a commitment to sustainability outperform their peers. Last year, in the most difficult of economic periods, they did. In 16 out of 18 industries, companies with a commitment to sustainability outperformed industry averages by a significant 15%, representing $650 million in protected market capitalization per company, according to A.T. Kearney.  Investing in sustainability for the long term will prove to be the best way to protect a company's value through the months and years ahead.

    Leaders in each Green Stock category should outperform in 2009, including:

    • Solar: First Solar (NASDAQ:FSLR), SunPower (NASDAQ:SPWR)
    • Wind: Vestas (VWS.CO), Gamesa (GAM.MC)
    • Geothermal: Ormat (NYSE:ORA), WaterFurnace (WFI.TO)
    • Smart Grid: IBM (NYSE:IBM), Itron (NASDAQ:ITRI), EnerNoc (NASDAQ:ENOC)
    • Energy Efficient Buildings: Owens Corning (NYSE:OC), Baldor Electric (BEZ), ICF International (NASDAQ:ICFI)
    • Water: TetraTech (NASDAQ:TTEK), Northwest Pipe (NASDAQ:NWPX)

    The State of Green Investing 2009 Table of Contents:

    The Green Investment Landscape
    News Highlights
    Insider Views on the Cleantech Stimulus
    Cleantech Stimulus Worldwide
    Updates on Green Industry Sectors
    The Techie Perspective on the Stock Market
    Interview: Analysis of Market Conditions Stock Highlights

    The Report can be purchased as part of a subscription or separately for $89.

    About Progressive Investor

    Progressive Investor is a monthly newsletter that guides investors and analysts toward green investments. Published by SustainableBusiness.com, it covers all green business sectors, including renewable energy, green building, water and healthy lifestyles.

    ++++

    Disclosure: The author is long in FSLR, SPWR, VWS, ENOC

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