Will Green Investing Do Well In This Economy?

Investing in 'green' or environmentally-friendly projects or companies is not expected to go down, despite the weakest economy since the 1930s, according to recent reports and surveys.

The World Economic Forum's recent report, Green Investing: Towards a Clean Energy Infrastructure identified eight important clean energy sectors: onshore wind, offshore wind, solar photovoltaic, solar thermal electricity generation, municipal solar waste-to-energy, sugar-based ethanol, cellulosic and next generation biofuels, and geothermal power.

The reported warned that at least $515 billion a year needs to be invested in clean energy until 2030 to stop carbon emissions from reaching a level scientists consider to be unsustainable.

During last week's World Economic Forum meeting, UN Secretary-General Ban Ki-moon said, "By tackling climate change head-on we can solve many of our current troubles, including the threat of global recession. We stand at a crossroads. It is important that we realize we have a choice. We can choose short-sighted unilateralism and business as usual. Or we can grasp global cooperation and partnership on a scale never before seen."

A recent survey by the Allianz Global Investors revealed that almost eight in ten U.S. investors surveyed (78 percent) think green tech can potentially be the "next great American industry."

Over nine in ten (91 percent) think that finding solutions to environmental problems will be important for years. Seven in 10 (69 percent) think investing in companies that are addressing environmental problems important, and 64 percent classified the environment as the most "desirable" factor in investment. There was a 30 percent increase from 2007 to 2008 in amount of investors who already invested in companies addressing environmental problems.

"The need for pollution control, clean water and energy efficiency is not going away. Investors perceive there is real opportunity here and they want to capitalize on it," says Brian Gaffney, CEO of Allianz Global Investors Distributors.

"Investors' bright outlook on the environmental technology sector is telling. This is perceived as a long-term opportunity," says Gaffney. "Investors understand that robust demand for innovation and solutions will fuel growth, and consequently profits, for years to come."

A report by the Hartman Group titled Sustainability: The Rise of Consumer Responsibility stated that three out of four consumers consider both environmental and social aspects when they purchase products. One in three are willing to pay more. Eighty-eight percent define themselves as participators in sustainable behaviors, and 37 percent think purchasing decisions are as important as voting. However, less than 25 percent can even name a single sustainable product.

In a December survey by the SunTrust Bank Private Wealth Management, 69 percent of business owners said, "Even if there is an economic downturn that moderately affects my business, I plan to maintain my current level of giving to environmental causes in the coming year.” Over 200 business owners with at least $10 in annual revenue were surveyed about green giving and investing. The majority believe it is either a "good" or "average" time to invest in green funds, and 40 percent believe it is a "good" time for businesses to have high environmental standards.

The Panel Intelligence's Quarterly Sustainability Tracking Study released in December cited a survey of 65 corporate sustainability executives of Fortune 500 companies in North America. Eighty percent of the executives surveyed plan to either maintain or increase levels of sustainability spending this year, and 82 percent rated energy efficiency number one area of investment.

The percentage of corporate revenues spent on sustainability and clean technology is expected to increase through 2010 by 73 percent. Corporate spending on sustainable waste management initiatives is expected to grow by 20 percent this year.

“In a downturn, some would back away from their current commitments,” said Dan Esty, a professor of environmental law and policy at Yale University, in 2007. “There could be stress in the next year or two, but I’m confident that investment in the environment will be higher.”

In 2007, Michael Chesser, chairman and CEO of Great Plains Energy, said, “The investment can be rheostated. In other words you can speed up or slow down, depending on how you see your demand going over the next couple of years.”

Gina-Marie Cheeseman

Investment in Innovation Needed

There is no denying the U.S. is in an economic crisis. It seems every day brings more news of major companies laying off employees. The Chinese word for crisis is made up of the characters for danger and opportunity. Maybe just maybe innovation is the opportunity that will not only lead the U.S. out of this crisis, but lay the foundation for a stronger economy.

The website, InnovationEconomics.org defines innovation as "the development and adoption of new products and services, more efficient production process­es, and new business models," and calls for innovation to be put "at the center of our nation's economic policies."

A report titled An Innovation Economics Agenda for the Next Administration states that the Congress and President need to "take concrete steps to ensure that the economy is on a robust growth path over the next decade." The report lists eight steps that should be taken:

1. Significantly Expand the Federal Research and Development Tax Credit
2. Create a National Innovation Foundation
3. Allow Foreign Students Receiving a graduate Degree to Receive a Green card
4. Reform the Patent System to Drive Innovation
5. Let companies expense new investments in information technology in the first year
6. Establish a federal chief information officer
7. Implement a national nroadband strategy
8. Implement an Innovation-based national trade policy

A recent BusinessWeek article proclaims that there is a "daring new direction in economic strategy sweeping U.S. states." States have been investing in innovative projects, blurring the line between public and private. The areas states have invested in include renewable energy, which is needed to stop climate change.

A report by the National Governors Association and the Pew Center on the States lists steps the states can take:

1. Develop a statewide research and innovation
strategy that not only puts in place all the
components for innovation, but aligns them
in ways that provide advantages to in-state
companies;
2. Make investments to gain talent, build topnotch
research enterprises and compete for
federal dollars in those focused areas where
the state can be world-class;
3. Encourage, even mandate, collaboration
among universities, the private sector and
other institutions;
4. Put world-class professionals, not political
pals, in key positions;
5. Create an organization and consistent
funding source that facilitates a continuity
in R&D partnering and spending; and
6. Hold the recipients of public investments
accountable for delivering on promised
benefits.

The current economic crisis has hit the states hard and most of them have huge budget deficits. Clearly, federal investment is needed. The stimulus bill passed by the House this week includes funds for research and development.