Obama's agenda drives interest among investors

But many financial advisers aren't sold on the concept

Apr 12, 2009 @ 12:01 am

By Sue Asci

Driven by the Obama administration's commitment to climate change and environmental concerns, investors are continuing to express interest in green investing, even though financial advisers are cautious. Nearly half the advisers, or 47.8%, who responded to an InvestmentNews survey on green investing, said that their clients have asked about green-investing opportunities. "It's not a foreign language anymore," said Judith Seid, owner of Blue Summit Financial Group Inc. of La Mesa, Calif., which has $60 million in assets under management. "Most people say, 'I know about it.' I have definitely seen an increase in interest," Ms. Seid said.

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The political climate is driving the interest, said Jennifer Hartman, principal of Greenleaf Financial Group LLC of Los Angeles, which has $10 million in assets under management. "Public policy is definitely making it more mainstream," she said. But despite an increase in government support for a green agenda, more than half of the advisers surveyed said that they don't think it is that important to include green investments in a portfolio. Of the 516 advisers who responded, 58.3% said it was "not too important" or "not at all important" to include green investments in a portfolio, while 41.7% said it was "somewhat" or "very important." When asked why they wouldn't be likely to recommend green investing to clients, advisers said that performance was a bigger concern. "It's hard to make a case that green investing is a good way to make money," said Peter Raimondi, president and chief executive of Banyan Partners LLC of Palm Beach Gardens, Fla., which manages $300 million in assets. "There isn't a grounded way to play any social movement and consistently make money," he said. "They are invested on a speculation of profit that might never occur.

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A full 25.7% of the advisers surveyed said that government subsidies aren't enough to make green investing a good long-term investment. And 25% of respondents said that green investing was a fad. Another 13.9% said that the green-investment sector was too volatile, and 7.8% said that the technologies and industries that are common in green investing weren't viable. The industries working on alternative-energy concepts in particular are still too new, advisers said. "Solar is probably the best out of the group, but I cannot put my clients' money on a hope," Mr. Raimondi said. "A political action doesn't necessarily translate into investment success," said Michael Herbst, a fund analyst at Morningstar Inc. of Chicago. "I would caution investors about making investment decision solely on political decisions." Still, some advisers see opportunities to turn a profit in the medium term. The administration plans to double the nation's renewable-energy capacity in three years. As part of the $787 billion economic stimulus package, President Obama included more than $150 billion for the green economy, with funding for energy transmission to focus on renewable technology, green job-training programs, clean-energy projects, energy efficiency programs and climate change research. "I think the stimulus spending and the fact that it includes a piece for green investing will spark new spending and ideas in the green space," said Jonathan Kreider, a fiduciary analyst at Lipper Inc. of New York. The government spending may help alternative energy companies like wind and solar get a stronger foothold, Mr. Herbst said. "The distribution of power generated by alternative-energy sources is another area that the United States has been lacking," he said. "If the money is used to strengthen the distribution piece, that could be another benefit."

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Among a selection of alternative energy and climate change solutions, 29.2% of advisers said that water management was the best investment opportunity.

Some 23.5% said wind power was the best opportunity and 18.9% selected solar power. Waste management was chosen by 12.8% of the respondents, followed by hybrid vehicles with 7.6%, recycling with 4.3% and air pollution control with 3.7%

"Water has to be dealt with," said Joe Clark, founder of Financial Enhancement Group LLC of Anderson, Ind. "We are already having problems in some states with businesses having to leave because of lack of water, and water infrastructure will get more than its fair share of stimulus money that has already been earmarked."

Some of those investments could be more attractive if gas prices rise, Mr. Clark said.

A fund with a broad spectrum of stocks across industry types is probably the best choice, Ms. Seid said. "Over time we'll find out what the real winner will be," she said.

The InvestmentNews survey was conducted online March 16-27.

E-mail Sue Asci at sasci@investmentnews.com.

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