October 9th, 2009 · No Comments

By Melissa Segrest
Green Right Now

Before the recession put a stranglehold on most every investment, clean technology was hot. Nearly 80 percent of all the venture capital spent in 2008 went to clean, green investments. The industries slumped for much of 2009, but now investors are returning to clean industries.

Regular Americans are curious about these clean tech companies, too, and they’re asking their financial advisers about them, according to one survey.

What is clean tech? It refers to technologies made without generating significant pollution, which produce products that can replace non-renewable energy sources, like oil, and make us more energy-efficient. Think solar cells and wind-generated power, hybrid or electric cars, green buildings, desalinated water and a “smart grid” that will help businesses and home owners to connect with new sources of power, like wind farms and giant desert photovoltaic installations

To give it an extra push, the government’s stimulus package has set aside about  $100 billion for clean, green products and industries. With that boost, venture capital is starting to flow again.

Considering clean-tech investing? We asked some of the best minds in the business to offer tips, advice and bits of wisdom:

Dallas Kachan Cleantech Group

What parts of clean tech are rebounding?

“The earliest sectors to rebound are tied to energy-efficiency and smart grids. The technologies are well understood and simple, quick and easy to deploy. Energy efficiency technologies are the low-hanging fruit,” said Dallas Kachan, managing director of Cleantech Group.  “By becoming more efficient we negate the need for more (energy) generation. . . there is a broad realization that over the last year you get high returns to pursue energy efficiency.”

Kachan’s company is among the most widely read sources of trade news, daily business and developments in the clean technology arena.

So far, solar deals and biofuels have gotten the lion’s share of clean tech investments. Some predict now that energy-efficient technologies will be the next hot commodities.

Are these industries solid?

“These technologies are ready for prime time. They weren’t ready 30 years ago. The timing wasn’t right in the ‘70s. They are no longer considered “alternative” technologies,” said Ron Pernick, co-founder of Clean Edge, a major market research and publishing firm focused on clean technologies since 2000. Clean Edge guides companies, investors and even governments with information about “trends, opportunities and challenges.”

“Globally, biofuels, wind and solar were a $116 billion industry last year,” Pernick said. The predictions for those three sectors? “They will be more than $300 billion in a decade.”

Now, big businesses are stepping into the clean-tech arena, Pernick said. Reports say that General Electric has sunk billions of dollars into wind power, and Applied Materials has put money into solar power.  Xerox, Kimberly-Clark and Walmart  are all putting substantial money into clean tech.

How quickly will these clean tech businesses grow?

Michael Kanellos Greentech Media

“Don’t expect a quick payoff,” said Michael Kanellos, editor-in-chief of Greentech Media, a leading online-media company. He suggested lowering your sky-high expectations. “Software companies can take off like a rocket because consumers can download applications for free and good ones travel by word of mouth. Twitter went from a few users to millions.

“But most green-tech applications – like energy-efficient appliances or solar panels – have to be manufactured. That costs money, which slows adoption,” he said.

In other words, “If Google had to go on your roof, install a bunch of glass plates and charge you $20,000 before you even started searching, you’d switch to Yahoo,” Kanellos said.

What about green mutual funds?

There may be safety in numbers, and clean/green mutual funds could provide extra comfort for mom-and-pop investors. Morningstar provides its members with research and analysis of the market, including tracking of 23 actively managed (and 15 exchange-traded) funds that are considered “green.”

“Somebody who wants to invest in green mutual funds should be aware of the various types of funds out there that are marketed as ‘green,’ said David Kathman, a Chicago-based analyst of mutual funds for Morningstar. A fund that consists of many start-ups is a riskier bet than one with a broader mix.

“Another group is ‘best of breed’ green funds, he said. “These look much more like regular core mutual funds in that they typically own well-known stocks, but within each sector they look for stocks with the best green profiles and environmental records,” Kathman said.

If you’re thinking about a mutual fund, study the prospectus for their “green” criteria or sustainability goals and the areas of green industry where they focus.

Like any other investment, looking for solid cash flows, stimulus money and diversified portfolios are important. A solid track record is as important with “clean” mutual funds as it is with any other fund.

Don’t just think American. Think globally

“Clean tech is not just an American phenomenon. There are very important deals and commercialization in . . . China and the Middle East,” said Clean Tech’s Kachan.

The clean-tech field also is making strong headway in South Korea, Japan, the European Union and India. “Governments around the world . . . are looking to create jobs, be energy-independent, meet stringent requirements for carbon and other emissions, said Clean Edge’s Pernick. “Governments are taking this seriously.”

In the third quarter of this year, Europe received much more clean-tech financing than America.

China is the world’s third largest economy, and they are aggressively looking for cleaner, more efficient energy. One report points out that China has doubled its ability to use wind-generated power over the past four years.

Pages: 1 2