Even given the daily fluctuations of ongoing and systemic world financial woes, climate change remains a front-burner issue - and a new political administration means that Washington's stance toward that issue will change, too.
Both Deutsche Bank and Goldman Sachs figure climate change as a financial opportunity as well as global concern and are taking different strategies to meet it. Over the past 18 months both have built multifaceted groups to create strategies related to climate change - that is, infrastructure investment, technology innovations, water supplies and agriculture, alternative energies and energy independence, and the ongoing long-term effort to establish a carbon market.
So far the two institutions are taking on climate-change-related investments themselves. In doing so, they are building analytical and investment expertise that could shape how they advise - and attract - corporate clients in planning strategies and business models to meet climate change.
Within days of each other last month both Deutsche Bank and Goldman showed examples of what they're up to. Deutsche Bank's global institutional asset management arm, DB Advisors, published a 160-page outline of the firm's take on the issue: "Investing in Climate Change: Necessity and Opportunity in Turbulent Times."
As for Goldman, the firm followed up on its efforts to integrate "ESG" - Environment, Social and Governmental-aspects into its investment research. As is Goldman's wont, the firm took an equity stake in Blue Source LLC, a Salt Lake City-based outfit which finds, develops and manages climate-change related projects and also is working to establish a portfolio for eventual carbon offset trading. Earlier this year Goldman reportedly invested $14 million into APX, a Silicon Valley startup that certifies carbon and emission offset certificates.
"Goldman Sachs will structure and market a broad range of verified emissions reductions resulting from certain greenhouse gas reduction projects in Blue Source's portfolio," the investment bank states, "including those associated with methane management from coal mining, wastewater treatment, landfills and animal waste; energy efficiency; carbon capture and sequestration from fertilizer and natural gas production; and industrial gas destruction."
Add water, infrastructure and agriculture products to the portfolio and that rounds out Deutsche Bank's interests as well, says managing director Mark Fulton, who's the global head of strategic planning and climate change strategist in New York for Deutsche Asset Management. Even though the world's capital markets are locked down in crisis, Fulton and his group are still bullish on the opportunities ahead. "We think governments are looking at infrastructure stimulus next year, tying that to climate change and energy security and the notion of 'green jobs.'" Fulton's been at his climate-change post since 2007; in 2006, the firm organized its asset management and advisory strategies around seven "mega trends," of which climate change is one. A six-person research team is now dedicated to the effort.
Nick Huber, a senior portfolio manager in global equities at Deutsche Bank based in Frankfurt, launched climate change mutual funds in North America last November that invest in clean tech, energy efficiency and climate adaptation-themed businesses. There are also funds in Europe and Asia-Pacific New Resources, which invest in renewables, agribusiness and water infrastructure; and other global agribusiness and new resources funds. Fulton does not consider this another name for investing in energy - energy is part of the picture, but he argues the mitigation aspect of climate change is broader. Among other things, that means the prospect of carbon trading.
Deutsche's publicly traded climate change funds in the U.S. are relatively small - about $90 million in assets under management - and have taken a pounding this year, down about 30 percent overall. But as with Goldman, the firm's organized for the long haul. And climate change, for banks as well as corporate clients, is nothing if not a long-haul issue.
