Dow Jones Newswire: My professional opinion on clean energy investments

FEBRUARY 6, 2009, 7:36 A.M. ET

GETTING PERSONAL: Green Investments Warming Up

By Jilian Mincer
A DOW JONES NEWSWIRES COLUMN

NEW YORK (Dow Jones)--Green investments may be poised to warm up after months of chilly returns.

Once overheated but now lagging like most stocks, shares in companies tied to alternative energy are getting new attention because of President Barack Obama's policies and worldwide pressures to decrease carbon emissions.

The investments, though now considered by many stock analysts to be cheap, are not risk-free. The credit crisis has created serious obstacles for many clean tech firms, and more will stall if there's a protracted recession. It's also difficult to predict what companies will survive as new technologies evolve.

Still, experts are banking on the industry because they expect gas prices to eventually rise again and greater focus on the environment already has begun.

"We have greater confidence than ever before that, with Obama in place, clean energy is ready for prime time," says Eric Becker, vice president and portfolio manager at Trillium Asset Management in Boston.

"It's going to be tough for businesses for the next six to 12 months, but with money from the stimulus package and reductions in carbon, these companies will do extremely well," he predicted.

A longer-than-expected economic downturn could curb short-term demand for energy, keep prices of traditional fuels low and slow down the push for cleaner technologies. But Becker believes that, long term, energy prices almost certainly will rise again.

Mindy Lubber, president of Ceres, a coalition of investor groups, environmental organizations and investment funds, says total U.S. clean energy investments were flat at about $142 billion in 2008. She expects a significant increase under the Obama administration, citing a report released at the recent World Economic Forum which said the United States would need to invest at least $515 billion a year in clean energy between now and 2030 to prevent carbon levels from pushing up temperatures.

Clean tech stocks have often failed to live up to big promises in the past. But Patrick McVeigh, president and chief investment officer at Reynders, McVeigh Capital Management in Boston, believes conditions have changed.

"There's now political will, environmental awareness of the problem and the economics make sense," he says.

The demand for alternative energy already is under way in Europe. In the U.S., 17 states have committed to greenhouse gas emission reduction targets and more than 700 cities have made pledges, according to a paper released in January by Reynders' firm and the Natural Resources Defense Council Center for Market Innovation. Obama wants to give states more power to tighten environmental standards.

Additionally, about two thirds of investors named the environment as the most desirable investment opportunity in a survey released in January by Allianz Global Investors, an investment management company.

"People may be cautious, but they see this as an important investment opportunity," says Bozena Jankowska, head of sustainability research for RCM and portfolio manager of the Allianz RCM Global EcoTrends fund.

"We are advising our clients to remain cautious in their asset allocation at this time, but we are taking on small amounts of risk," says Jon Ellenbogen, a financial adviser for Wachovia Securities in Washington, D.C. "It's a good time to start tiptoeing into the alternative energy market."

But the focus is on companies with healthy balance sheets, financing for future projects and signed contracts.

"For investor with a long time horizon, this is a great time to be buying stocks in the clean energy space in the smart grid space and the energy efficiency space," says Becker of Trillium. "Diversification is particularly important in this area because risk to individual companies is high."

Becker recommends, among others, SunPower (SPWRA) - which manufactures and installs solar technology; Ormat Technologies, Inc. (ORA) in the geothermal industry; Itron (ITRI), which produces advanced meters; and American Superconductor (AMSC), which makes parts for wind turbines and super-conducting wire.

Another possibility is to spread the risk by investing in a green mutual fund or exchange-traded fund. Investors need to keep in mind that both fees and funds' investing approaches vary significantly. Some are more aggressive than others, and many are dramatically lower in the last year.

Some frequently recommended funds include Calvert Global Alternative Energy (CGAEX), Winslow Green Growth (WGGFX), Green Century Balanced Fund (GCBLX), Portfolio 21 and PowerShares WilderHill Clean Energy (PBW).

(Jilian Mincer is a Getting Personal columnist who writes about personal finance; she covers topics including pensions, insurance, and college and retirement savings. She can be reached at 201-938-4042 or by email at jilian.mincer@dowjones.com.)

-By Jilian Mincer, Dow Jones Newswires; 201-938-4042; jilian.mincer@dowjones.com