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Oct 152010

(This piece by Andrew Winston, green business consultant and author of Green Recovery and
Green to Gold (with Daniel Esty)  first appeared as part of a series on the smart grid at Harvard Business Online.)

Andrew Winston

Creating a clean economy will not be easy. It will require sustained, consistent, and large-scale investment across many sectors, including transportation, building systems and appliances, energy generation, and of course the electric grid itself. We will need new, more intelligent software and hardware to manage the new demands on the grid.

We’ll need a smarter grid, one that will both communicate in real time with customers’ devices to help manage peak demand and manage the inflows of renewable energy and plugged-in electric cars. But this is not a single pursuit; it’s the connective tissue in a network of new technologies and energy systems. These are multi-trillion-dollar markets, so the opportunities for the countries and companies that lead the charge will be vast. And some governments, especially in China and Germany, are taking this challenge much more seriously than others.

At the country level, I see two core indications of leadership and commitment to the clean energy economy:

(1) the amount of capital invested by both the private and public sectors and,

(2) the implementation of an aggressive policy framework that supports the economy-wide shift.

On both fronts, a few countries, but China in particular, are going for the gold.

According to a pithy report from Deutsche Bank titled “The Green Economy: The Race is On”, in the years 2000 to 2009, the U.S. invested (public and private) about $67 billion in clean technology. Similarly China spent $72 billion and Germany $38 billion. However, as a percentage of GDP, China, Germany, and even Brazil are investing at a rate three times greater than the U.S. On the specific issue of smart grid investment, another report estimates that the U.S. and China far outpace the rest of the world with an estimated $7 billion each in spending in 2010 alone (PDF). Companies like IBM, Siemens, GE, Cisco, and HP have noticed this investment — and plan to get a piece of the business.

The U.S. economic stimulus package, technically the American Recovery and Reinvestment Act (ARRA), is really kicking in now. ARRA provides tens of billions of dollars for energy efficiency, R&D investment, and new transmission and smart grid investments. According to a recent report in Time Magazine, the Obama administration has turned the Department of Energy into “the world’s largest venture capital fund.”

This level of investment should not be taken lightly, but the stimulus is short-term. China is doing things differently, making longer-term, sustained commitments that are much larger. The country is already in the process of building 16,000 miles of high-speed rail (that’s roughly, oh, 16,000 more than the U.S.). And China is bringing together 16 state-run companies to put one million electric cars on the road within a few years.

But it was the country’s ten-year plan that made some jaws drop. Between now and 2020, the country will invest 5 trillion yuan in the clean economy. That works out to about $75 to $100 billion per year for 10 years running (smart grid investment alone is estimated at $60 to $100 billion over the next decade). Imagine the U.S. Congress passing the equivalent of the highly controversial stimulus package 10 times over (not likely).

Since the $100 billion in stimulus spending is significant, it’s hard to argue that the U.S. is not investing in the future. It’s the second aspect of green economic leadership — building a strong climate and carbon policy framework that supports the economy-wide shift — where the U.S. falls short.

Deutsche Bank’s report suggests that countries need a policy regime that provides “transparency, longevity, and certainty” to increase investment and get private money off the sidelines. The report lists eight national policy elements that it deems critical, including having a concrete emissions target and a renewable electricity standard, among others. Only Germany and China have put all eight policies in place, while the U.S. has only implemented one in the form of some tax benefits. Unsurprisingly, Deutsche Bank concludes that, “the US is falling behind in the race to develop new technologies, industries, and jobs as the global economy moves towards a low carbon future.”

Finally, as an indication of how serious China really is, the country has built the largest solar and wind production industries in the world in just a few years. The government is supporting its renewable energy industries so aggressively and lowering their cost of business so much, that it’s likely the country is breaking World Trade Organization rules on fair play.

Even if that’s true, you have to admit that China is in the clean economy race to win it. Is the U.S.?

Mar 052010

From Green Right Now Reports

As climate change accelerates, leading investment groups are asking to hear more from corporations about their plans to adapt and survive in a changing world.

U.S. investors – pension funds, labor, religious and other institutional investors – filed a record number of climate change resolutions in 2009.

CeresThe 95 shareholder resolutions were filed with 82 U.S. and Canadian companies, some of which face special challenges from climate change, according to a news release by Ceres, a coalition of investors, environmental and social responsibility groups.

The number of resolutions represent a 40 percent increase over 2009 and were likely encouraged by recent guidance from the Securities and Exchange Commission on climate disclosure.

“As the SEC recently affirmed with its disclosure guidance, climate change presents clear material risks and opportunities for U.S. businesses – and investors have a right to know which companies are well prepared and which are not,” said Mindy S. Lubber, president of Ceres, which helps coordinate the shareholder filings.

Companies targeted by the resolutions include oil and gas corporations such as ExxonMobil and ConocoPhillips, as well as the nation’s largest coal companies, electric utilities, homebuilders, “big box” retailers, financial institutions “and other businesses that investors believe are not adequately disclosing and managing potential climate-related business impacts,” according to Ceres.

Tar sands open mining, Alberta (Photo: U.S. Dept. of Interior.)

Tar sands open mining, Alberta (Photo: U.S. Dept. of Interior.)

Investors want to know about the risks companies are taking with certain business practices that could increase a company’s carbon footprint and work against sustainability.

Resolutions, for example, targeted ExxonMobil and ConocoPhillips over the companies’ plans to spend billions to extract fossil fuels from Canada oil sands deposits. The  shareholders want more information about the environmental impacts of this controversial practice, which faces legal challenges in both Canada and the U.S. They also asked for the companies’ assessments of potential risks to their reputation over oil sands extraction, a more complex, costly way to extract oil for petroleum.

Other resolutions asked big coal and electric utilities about their plans to reduce greenhouse gas emissions as the U.S. readies for possible regulation of GHGs.

“We want our companies to closely look at the impact climate change legislation and regulation have on them, to realistically assess those risks, and to consider the indirect consequences of climate change-driven regulation and business trends on their activities,” said Jack Ehnes, CEO of CalSTRS, the California teachers’ retirement pension fund, which manages $131 billion dollars in assets.

New York State Comptroller Thomas P. DiNapoli, whose office oversees the state’s $129.4 billion pension fund and filed resolutions with CONSOL Energy Inc. and engineering firm KBR, also spoke out on behalf of more transparency.

“Investors cannot remain silent to the threats of global climate change, which has the potential to negatively impact businesses and their long-term profitability. The New York State Common Retirement Fund wants the companies it invests in to more clearly assess and better manage the far-reaching risks of climate change,” DiNapoli said.

Feb 112010

From Green Right Now Reports

Critics of sustainable living initiatives often pin their arguments on the possibility of dubious return on investment. But a recent survey of American investors indicates that many now believe going green can be good for the economy – and their own pocketbooks — as well.

The survey, the results of which were released this week by Allianz Global Investors, said 73 percent of all investors who responded think policies to promote “green” practices and technologies will have a positive impact on economic growth. Fifty-seven percent believe “green” jobs can help turn around the U.S. economy.

“It’s clear to me that government investment in the environment will be an important engine for economic renewal in the United States,” said Bozena Jankowska, head of the RCM Sustainability Research Team and lead portfolio manager of the Allianz RCM Global EcoTrends Fund.

Jankowska noted that in his State of the Union address, President Obama said “the nation that leads the clean energy economy will be the nation that leads the global economy, and America must be that nation.”

“This sentiment signals unwavering support which could represent a very significant opportunity for investors,” Jankowska said.

The poll of 1,000 adults, conducted for a third consecutive year, probed investor understanding and attitudes toward the environment as an investment opportunity. The survey was conducted via the Internet between Dec. 28, 2009 and Jan. 12, 2010 by GfK Roper Public Affairs & Media, a division of GfK Custom Research North America.

Participation was limited to individuals who at least shared responsibility for investment decisions in households with financial assets of $100,000 and up.

Other findings include:

  • 63 percent of investors classified the environment as the most desirable opportunity of 11 categories offered.
  • Between 2007 and 2009, the number of investors who say they already have invested in environmental trends jumped from 17 percent to 29 percent.
  • 54 percent of all investors said they are at least “somewhat likely” to invest in environmental technology over the next year.
  • n  78 percent of investors believed we were likely to see more green initiatives in the first year of the Obama Administration than in eight years of the Bush Administration.
  • Only 49 percent of investors said Obama has done as much as he should to promote environmental investment in his first year.
  • In the previous year’s survey, 74 percent of investors expected the new Congress to be more supportive of environmental technologies than its predecessor. This year, only 34 percent said the current Congress has done as much as it should.

Despite an increased optimism, not all investors were confident about jumping in:

  • 59 percent view environmental investment as mostly socially responsible, while just 41 percent see it as a good financial investment.
  • More than two-thirds (69%) said they would need to consult a financial advisor for help investing in the environment.
  • Among those with a financial advisor, 76 percent believe their advisor is at least somewhat knowledgeable about environmental investing, and 50% think it is important that their advisor bring them more environment-related investment opportunities.
  • 72% of those investors say that their financial advisor has yet to recommend an environmental investment opportunity.

Copyright © 2010 Green Right Now | Distributed by Noofangle Media

Oct 092009

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 01

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.