Money Management Executive
Investors and the public at large are becoming more attuned to the threat that global warming poses to the economy, the environment, and society.
In response, Calvert Group Ltd. has launched the Calvert Global Alternative Energy Fund, which will invest in U.S. and international companies that focus on alternative energy sources such as solar, wind, and biofuels.
"The fund is able to meet investors' investment strategy and social needs," Steve Falci, Calvert's chief investment officer of equities, said at the Alternative Energy Investing event the Bethesda, Md., company hosted last week.
This type of alternative investing "is quite an emerging theme and maturing rapidly," said Jens Peers, the director of ECO Funds, a unit of KBC Asset Management of Dublin that is subadvising Calvert's new fund. Mr. Peers said many investment banks have shown more interest in the sector in the past few months.
Seventy-six percent of investors are concerned about global warming and its implications for and their children and grandchildren, according to a Calvert-sponsored survey by Opinion Research Corp.
Opinion Research polled 2,600 individuals for the "Calvert Climate/Change Alternative Energy" survey, 1,094 of whom were identified as investors. Eighty-five percent of the investors "agreed that" alternative-energy investments such as wind, solar, and other sources of clean power present an opportunity "to support the environment and generate a profit at the same time," Calvert said.
Bennett Freeman, senior vice president for social research and policy at Calvert, said that, from the heat waves in Europe to Al Gore's documentary "An Inconvenient Truth," it is not just the substance of the issue, but real images, that are getting across to the public.
Calvert's new fund has a universe of about 120 stocks to choose from. Thirty percent are U.S. stocks, 60% are European companies, and the remaining 10% are scattered around the globe, mainly in China and Japan, Mr. Peers said. Calvert screens the companies using socially responsible criteria.
"Diversification is very important in these types of funds," Mr. Peers said. The portfolio needs companies in the more mature sectors of solar and wind, but also emerging-growth and early-stage companies, he said.
The portfolio has to be actively managed, because some of the stocks are very specific and rely on other stocks to perform well, Mr. Peers said. "Managers have to understand the value chain."
One reason for the push toward alternative energy is the rising price of already-expensive fossil fuels and the concomitant decline in prices for renewable energy, Mr. Peers said. Mr. Freeman said, "The world must move away from its dependence on fossil fuels."
Also, there is increased political support for using alternative energy. The issue has moved from a "political debate to real action," Mr. Peers said.
A lot of work needs to be done on the federal level, while on the state level California is among the standard-bearers, Mr. Peers said. In September, Gov. Arnold Schwarzenegger signed the California Global Warming Solutions Act of 2006, which calls for a reduction in the state's carbon emission to 1990s levels by 2020 and to 80% below 1990 levels by 2050.
Seventy-one percent of the investors surveyed by Opinion Research said they would consider investing in an alternative-energy mutual fund, but 84% said there were not enough opportunities to do so.
Speakers at the Calvert event said investment advisers need to make more of an effort to offer alternative-energy mutual funds to their clients. Only 50% of investors who use an adviser said they had discussed alternative-energy investing with them.
"This is a big disconnect, as investors want more choices in alternative-energy mutual funds," said Graham Hueber, a senior project manager at Opinion Research, of Princeton, N.J.
In particular, more women (86%) than men (66%) are concerned about global warming, the survey found. Advisers should heed these concerns, speakers said, because women are much less likely then men to discuss alternative-energy investing with their financial adviser.
Demand for socially responsible investing is up. More investors want such options in defined-contribution retirement plans, according to a Mercer Investment Consulting survey of 129 plan sponsors.
The survey, "Defined Contribution Plans and Socially Responsible Investing in the United States," found that 60% of the sponsors were offering a socially responsible investment option or were planning to offer one within the next three years.
