With growing concern about carbon emissions, global warming, and sustainable products, individual investors who are guided by environmental ethics are no longer lone rangers. The eco sector is still a specialty, for sure, but going green is an increasingly popular strategy, analysts say.
Morningstar, a leading provider of independent investment research, says U.S. carbon emissions will fall 28 percent from 2005 levels by early next decade, a valuable consideration when making investments in alternative energy sources.
“We continue to forecast U.S. renewable energy capacity will double during the next eight years based on state renewable energy portfolio standards and improving economics,” said Andrew Bischoff, a Morningstar analyst. “The move to abandon the [Clean Power Plan] could embolden states to strengthen renewable energy standards, similar to moves … by politicians and corporations following the administration's announcement to withdraw from the Paris climate agreement.”
Not all green mutual funds are created equal, says Harris Roen, an alternative energy specialist and publisher of the Roen Financial Report. He identified three funds as examples of "alternative energy focus," meaning they are intensely green:
● Firsthand Alternative Energy (ALTEX) lists First Solar, Tesla, and Vestas Wind Systems as three of its top 10 stocks.
● New Alternatives (NALFX) includes stakes in Innergex Renewable Energy, TransAlta Renewables, and NextEra Energy, the parent company of Florida Power & Light, which is ramping up on solar.
● Guinness Atkinson Alternative Energy (GAAEX) has SunPower, Canadian Solar, and JinkoSolar in its 10 top holdings, which include a 40 percent stake in Asian markets.
Altex has dropped 4.3 percent since inception in 2007. Nalfx is up 7.8 percent since coming on in 1982. Gaaex is down more than 17 percent since 2006.
According to David Kathman, another Morningstar analyst, “Green funds invest in a variety of ways to meet their ecofriendly goal. But many are investing in startup companies that are riskier than the traditional ones that most diversified funds own.”
Kathman identified Portfolio 21 (PORTX) and Spectra Green (SPEGX) as examples of green funds that invest in large global companies where the guiding principle for fund bosses is being “socially responsible,” a wider berth for investing that can include outfits like Apple and Google.
Portx, which requires a $5,000 minimum investment, has returned up 5.75 percent since its founding in 1999. Spegx ($1,000), launched in 2000, is even more modest, 2.68 percent.
Bottom line, investors agree, is the green market is here to stay but also requires a long-term view.
Jeff Siegel is the publisher of Green Chip Stocks and a total bull on alternative energy, transportation markets, sustainability and agriculture.
"I’m a big believer in the positive power of capitalism," Siegel said in an article for WealthDaily.
Siegel acknowledges that natural gas, nuclear, and even coal will continue to claim the largest part of the energy pie well into the next decade but also thinks clean power is undervalued as an investment in the current market.
"Although solar tends to get the most press when it comes to clean energy, the wind energy industry is still a very serious juggernaut," Siegel said. "By the end of 2020, the cumulative global installed wind capacity is expected to be more than 750 Gigawatts — or the equivalent of nearly 70 percent of the total capacity of U.S. electricity generation."
Siegel says only 10 or so major companies with proven track records build wind turbines, including Vestas and GE, and even fewer companies build the huge blades.
"One of those companies is called TPI Composites," Siegel said.
TPI Composites (TPIC), the largest U.S.-based independent manufacturer of composite wind blades, closed Monday in trading at $24.36, up $1.13 (4.86 percent). For the past year, the stock has grown more than 67 percent.
Not bad for socially responsible investing.
» Editor's note: The Daily Fray does not own any shares in any of the investments mentioned in this story.
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