Demand for Green Advice Seen Outstripping Supply
Kalter, Joanmarie, American Banker
Byline: Joanmarie Kalter, Bank Investment Consultant
Investors are interested in going green with their portfolio, but advisers are failing to even suggest investing in it, according to a Roper Center poll.
In the online poll, which was conducted in December and commissioned by Allianz Global Investors, 71% of respondents chose environmental technology as the most desirable of seven major sectors, 54% said that the environment would be an "important focus" for them in the future, and nearly half said they hoped to make a green investment in the next year.
Over 70% of those polled said that they would need an adviser to guide them, but more than 80% of those already working with advisers said their adviser had yet to recommend a single environmental opportunity.
Demand is strong; revenue for producers of alternative energy sources such as solar photovoltaics, wind, biofuels, and fuel cells increased 40% last year, according to Clean Edge Inc., an environmental research and consulting firm.
Money invested worldwide in energy technologies - including venture capital, project finance, public markets (such as initial public offerings), and research and development - rose 60% last year, to $148.4 billion, according to the research firm New Energy Finance Ltd.
Government regulations increasingly mandate cleaner air. The mayors of nearly 800 U.S. cities have committed to reducing greenhouse gases to the levels of the Kyoto Protocol, and California is requiring utilities to generate 20% of their energy from renewable sources by 2010 and 33% by 2017.
Steve Schueth, an adviser who has served this market for 20 years and is now the president of the independent advisory firm First Affirmative Financial Network LLC, says the earliest green investors were part of the granola-crunching, "socially responsible investor folks."
In the 1990s, when Mr. Schueth worked at Calvert Group Ltd., the social investment firm studied high-net-worth investors, comparing those attracted to tax-free funds with those preferring its socially responsible ones. Both groups cared about clean air and good schools, but the tax-free fund investors were concerned only with clean air in their own neighborhoods and good schools in their own towns.
And practically speaking, there were not a lot of financial vehicles to offer back then, Mr. Schueth said. "There was just not much green product."
In those days, socially responsible funds often used negative screens - excluding companies that polluted or otherwise sinned - rather than seeking those with clean and innovative technologies.
Green investments were a niche market, according to Brian Jacobs, managing director and head of sales at Allianz, which recently launched some green funds. The products were "nice to have," he said, "but not a way for clients to meet their long-term financial goals."
If advisers felt discomfort with the sector, they could cover themselves with the conventional view that socially responsible securities underperformed. Lloyd Kurtz, an adviser with Wells Fargo & Co.'s Nelson Capital Management, said there was not much reliable data to disprove it.
But today nearly one of every nine dollars under professional management in the United States is invested in socially responsible ways, according to the Social Investment Forum. …