In the United States, energy advocates for years
have divided into two camps over alternative energy fuels: Those who
think wind, solar energy, biofuels, geothermal energy and ocean or wave
power are not worth developing (damn the effort), and those who think
of them as a viable future alternative to coal, oil and natural gas
(damn the critics).
Now, suddenly, the prospects for renewable and other
clean energy sources seem brighter-thanks to high gasoline prices;
consensus that climate change is a major problem; and growing demands
from China, India and other developing countries that are straining
traditional energy resources.
On the investment side, alternative energy has
emerged as a distinct sector with long-term investment potential. A new
entrant, Calvert Investments, best known for its socially responsible
mutual funds, this week at a press briefing in New York City, launched
the Calvert Global Alternative Energy Fund (Ticker: CGAEX), and
released results of a survey showing increased investor interest about
climate change and alternative energy investments (http://www.calvert.com).
The "Calvert Climate Change/Alternative Energy
Survey," conducted for Calvert by Opinion Research Corp. (ORC) found
more than three of four U.S. investors, out of 1,094 surveyed, are
concerned about global warming and climate change issues. Nearly nine
of 10 investors agreed that alternative energy investments represent a
dual opportunity to support the environment and generate profit at the
same time. However, only one in five investors queried responded
affirmatively that their financial advisor had discussed investing in
alternative energy.
Steve Falci, Calvert's chief investment officer,
equities, said the fund was a response to increased demand from
financial advisors, individual investors, and institutions seeking an
alternative energy allocation in their clients' portfolios for
diversification purposes. "There aren't a lot of these vehicles out
there," said Falci. "It's important for (advisors) to sit down with
clients and see how much to allocate to alternative energy. We're
providing an additional vehicle for diversification they haven't had
before."
Falci said the fund offers diversification potential
for traditional socially responsible investors, as well as all global
investors.
Jens Peers, head of ECO Funds at Dublin-based KBC
Asset Management International and lead manager to the Calvert fund,
noted the performance of alternative energy stocks had doubled over the
past three years, following overall strengthening in the energy sector.
In 2006, the sector was up 50%; so far this year alternative energy
stocks are up 25%, and trading at an average P/E of 35.
Peers said interest in alternative energy has
accelerated worldwide as a result of growing interest in climate change
and the need for specific products to meet this appetite. "We expect
strong fundamentals to continue in the next few years, driven by
increasing prices in fossil fuels, while at the same time (we predict)
prices will fall for renewable energy sources," Peers said after the
briefing.
KBC is targeting 50 to 70 stocks for the fund's
portfolio, with a projected breakdown that would include: 30%, United
States; 60%, European, and the balance in Asia, mainly Japan and China.
Worldwide, the investable universe of alternative energy stocks
consists of approximately 120 companies, Peers said.
He noted both the public and private sectors have
accepted the need for alternative fuels, and debate is now moving
toward the political side. Peers said China has committed the
equivalent of US$100 billion to develop renewable energy sources
between now and 2020. In the U.S., a group called the U.S. Climate
Action Partnership, comprising a number of conglomerates-General
Electric, Caterpillar, British Petroleum, DuPont and Duke Energy, among
them-is spearheading a call for government action.
For investors, the significance is that climate
change is finally on the federal government's agenda, said Bennett
Freeman, Calvert's director of research and social policy. "There will
be (global-warming) caps (on noxious emissions); there will be
regulation at the federal level, sooner rather than later," said
Freeman, noting even the Bush administration had done an about face on
climate change, though it prefers countries set targets rather than
binding global-warming caps. "There is a real mainstream awareness of
the issue," said Freeman, who doesn't expect immediate action even with
a Democratic Congress, though he didn't rule it out.