Investors call for government to take on climate change

Mar 26, 2007 @ 12:01 am

By Riva Froymovich

NEW YORK — Clean energy is increasingly gaining the attention of institutional investors.

Last Monday, dozens of top investors managing a total of $4 trillion in assets asked Congress, the Securities and Exchange Commission and the White House to approve stronger climate control policies. The coalition said in a statement that the competitiveness of U.S. businesses hinges on developing the clean-technology industry.

“There’s nothing surprising about these types of calls,” said Ron Pernick, co-founder and principal of Clean Edge Inc., a clean-technology research firm in Oakland, Calif.

Revenue from clean-energy companies worldwide increased nearly 39% to a collective $55.4 billion last year, according to a research report released this month by Clean Edge. By 2016, the collective revenue of such companies could reach $226.5 billion, the report said.

Among the 65 companies that were part of the coalition were Allianz AG in Munich, Germany, the California Public Employees Retirement System in Sacramento, Domini Social Investments LLC in New York, F&C Asset Management PLC in London, Merrill Lynch & Co. Inc. in New York, The Calvert Group Ltd. in Bethesda, Md. and Walden Asset Management in Boston.

“Through their actions, they are demonstrating that preventing climate change isn’t just good for the planet; it is an opportunity to bolster the bottom line,” Timothy E. Wirth, president of the United Nations Foundation in Washington, said at a press conference announcing the coalition.

The coalition called for three specific steps from the government:

• A market-based national policy that will achieve a 60% to 90% long-term decrease of greenhouse gas emissions.

• A realignment of national incentives to stimulate new clean technologies.

• A clarification of company disclosure requirements from the SEC.

“In the face of mounting evidence demonstrating the economic implications of climate change, we strongly urge the SEC to acknowledge it as a material consideration and require all companies to disclose its impact to shareholders,” Connecticut State Treasurer Denise L. Nappier said at the press conference. “Too many companies [are] still leaving shareholders in the dark.”

Furthermore, speakers said, by creating caps on the amount of carbon that companies can emit and turning those limits into a system where companies and traders can trade those carbon credits — as practiced in Europe now — clean incentives can turn a profit.

“When we put caps on carbon, that’s what will drive the market,” said Mindy S. Lubber, president of Ceres Inc., a Boston-based coalition of investors and environmental groups that has done extensive work on global-warming issues.

Financial firms such as Merrill Lynch call the carbon market an opportunity to do “both well and good,” said Mark Goldfus, a senior vice president at Merrill Lynch, one of the top carbon traders in the world and a primary sponsor of the Carbon Disclosure Project, a London-based group of institutional investors trying to push companies to recognize their impact on climate change.

“We’re seeing more and more of this type of activity,” said Mr. Pernick of Clean Edge.

Fund managers are always looking for future areas of opportunity and this is it, he said. “One of the greatest areas of innovation right now is occurring within clean energy.”

In particular, growth rates for solar and wind, which are greater than 30%, are parallel to the rise of the personal computer industry, Mr. Pernick said.

“If you aren’t taking a leadership role on climate, you risk the ramifications of not being involved,” he said. For example, reinsurance companies saw that they should be in the lead of climate change policy because of the cost of insuring against natural disasters, Mr. Pernick said.

In the United States, venture capitalist investment in clean technologies nearly tripled to $2.4 billion last year, from $917 million in 2005, representing nearly 10% of total VC activity, compared with less than 1% of total activity in 1999, according to the Clean Edge report.

Biofuels received the most investment, at $813 million, up from $20.5 million in 2005 and $800,000 in 2004, according to the report. Companies that focus on energy efficiency received $476 million last year, up from $272 million in 2005 and $192 million 2004; and solar energy received $264 million, versus $156 million and $68 million in 2005 and 2004, respectively.

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