Green investing -- sometimes referred to as socially responsible investing -- encourages investment agencies to focus on companies and investment vehicles that offer products and services that advocate a cleaner environment and practice sustainability when it comes to the use of resources. Leading the pack of these types of investments are companies that focus on cleaner or renewable ways to provide electricity and energy. The reason for interest is obvious: As oil prices continue to push record highs, over $30 billion in new investments was poured into the clean sector last year. Some are likening this rapid expansion to the telecommunications explosion from the '80s.
By all means, this is not a comprehensive list -- hundreds of companies fit the bill and may make excellent, long-term green investment choices. However, this collection of companies offers a glimpse into the broad variety of green investing. As always, please consult with your financial advisor before making any investment decisions.
the big boys
Here are some ideas from the ranks of the larger, more established companies. You may be surprised at some of the entries on this list as they are typically associated with being the problem rather than the solution. However, regardless of a company’s past, the evidence is overwhelming that the need for environmentally friendly products/services are taking over the markets. These established companies are definitely positioning themselves for the long-term in this arena.URS Corp (URS)
URS is one of the nation’s largest engineering and construction firms with nearly 30,000 employees. While the company operates in a variety of construction-related capacities, serving government and private clients, a recent acquisition may have URS seeing green. On May 28, 2007, URS announced it would pay $2.6 billion in cash and stock to acquire Washington Group International. Washington Group has a particular knack for securing environmental construction and engineering projects -- specifically, a $550-million contract with Allegheny Energy with the aim of reducing 90% of the sulfur dioxide emissions from the plant, and another contract with FutureGen Industrial Alliance to provide support services for the development of a coal-fueled, near-zero emissions power plant. URS was interested in Washington Group’s ability to service the nuclear power plant industry, especially with a potential resurgence on the way. The combination of URS and Washington Group makes them one of the largest teams of nuclear scientists and engineers in the country.General Electric (GE)
GE does more than make light bulbs and appliances. In fact, GE is so intent on making the most of the opportunities emerging in green investments that it has established a new corporate clean-up policy, dubbed "Ecomagination." In 2006, GE invested more than $900 million in cleaner technology R&D and is aiming to up that budget to $1.5 billion by 2010. GE’s Ecomagination goals include increasing the sales of ecomagination-certified products to over $20 billion by the end of the decade. GE is also serving the industrial realm, providing emissions monitoring and control systems as well as wind turbines and clean coal systems. GE has a history of diverse business operations and is fully primed to be a major green player in the 21st century.BP
It is hard to believe that a big oil company such as BP could be considered a player in this field. Well-publicized problems at facilities in Texas (resulting in 15 deaths) and Alaska certainly did nothing to add to BP’s green image. However, from an environmental investing standpoint, this attention may be just what BP needed to get its green initiatives into the mix. Internally, over the next five years, BP will be investing $350 million to reduce CO2 emissions by up to 1 million tons each year. BP is also one of the world’s leading solar companies and has teamed with The Home Depot to help bring its solar-power solutions to the market. BP also has its arms in the wind energy business and jointly owns a 22.5 MW wind power farm in the Netherlands. BP is also becoming more of an advocate in things such as natural gas, hydrogen powers, and actively markets its crystal clear, more environmentally friendly gasoline. BP realizes the importance of environmental sustainability and the need to diversify its product line into cleaner energy avenues.the little guys
The following smaller companies offer greater rewards, but at a much higher risk. They are focused on alternative energy practices, critical to being green. Being smaller, these companies could post big gains if sales take off and their products materialize.Tower Tech Holdings Inc. (TWRT)
Tower Tech is the only company that is exclusively dedicated to producing the structures and towers for wind power energy. With over 700,000 square feet of manufacturing space, Tower Tech is counting on the fast-growing windmill trend to continue. The cost of wind power is 80% less than what it was 20 years ago, and recent comprehensive reports have suggested that the production potential of wind power is over 40 times as much as the world’s current electrical usage. Tontine Capital Partners, a very reputable hedge fund, invested over $15 million in early 2007 in exchange for more than 25% of Tower Tech.Ascent Solar Technologies Inc. (ASTI)
Photovoltaics -- or PV -- is a technology that uses solar cells to convert sunlight directly into energy. Ascent Solar Technologies has developed its own technology and is making its own products for both commercial and residential applications in this field. The company thus far has had limited success selling its development -stage product line, but Norsk Hydro -- one of the world’s largest energy corporations -- thought it was worth forking over $10 million to Ascent to own about 25% of the company. Ascent has also been the recipient of several accolades, including research contracts from the U.S. Air Force.Hoku Scientific, Inc. (HOKU)
Hawaii-based Hoku Scientific takes a different angle on the solar-power industry. Hoku manufactures and supplies the materials and components used in building things like solar panels, particularly the material polysilicon. Two recent deals have sent their stock soaring from $3 to $12 per share: A seven-year deal with Solar-Fabrik AG for up to $185 million of polysilicon, and a $678-million 10-year deal with Suntech Power Holdings Co. Ltd. to deliver the same material. These two agreements account for why Hoku has seen a sudden market spike.CECO Environmental Corp. (CECE)
CECO Environmental is perhaps the least exciting of the bunch, but may be the most stable. CECO has been around for over 40 years, providing clean air solutions and engineering services and products to its customers. Its product line includes things like ventilation systems, dust collections, energy management, and related engineering and installation services. Company’s CEO and founder Phillip DeZwirek has commented that “the industry's awareness of the need to improve indoor and outdoor air quality has resulted in an increasing demand for CECO's all -encompassing environmental solutions and products.” Thus far, the company has impressed investors and consumers alike. In 2006 net sales increased 66% and the company sported a profit of $3.1 million (compared to a loss of $435,000 in 2005). CECO's belief in growth is reflected in their compensation structure: DeZwirek earns no salary and seems to be banking on his 14% stake in the company to bring home the bacon, so to speak.
mutual funds & etfs
If you're uncomfortable with the risks of stocks and prefer to have a money manager screening for solid companies that meet your green criteria, consider a mutual fund that focuses on green investing or an energy-related index fund or exchange traded fund (ETF). These investments offer diversification by investing in a myriad of socially responsible investments without the risk associated with being fully invested in a single stock or company.Green Century Mutual Funds
According to their company motto, Green Century Funds aims to “put your money to work for cleaner air, water, and a healthier planet.” Green Century offers two funds: The Green Century Balanced Fund (GCBLX) and the Green Century Equity Fund (GCEQX). The Balanced Fund finds its own mix of environmentally friendly companies and buys their stocks and bonds. Over the past 10 years, the Balanced Fund has returned an average of 7.5% each year, returning 12.7% in 2006. Green Century seeks out companies that make and market products that aim to enhance the environment, maintain clean environmental records or have active corporate responses to environmental issues. Johnson & Johnson and Emerson Electric Company are two of the fund's larger holdings.Domini Funds
Domini, like Green Century, has its own line of funds that invest in socially responsible companies. The Domini family of funds is far more extensive than that of Green Century. Domini maintains separate funds for its flagship Social Equity Fund (DSEFX) and other targeted areas like Europe (DEUFX), Asia (DPAFX) and a bond fund (DSBFX). The Social Equity fund is the largest by far with over $1 billion under management. The Domini 400 Social Index (DS400), which is considered the benchmark for socially responsible investing, was created partially by Amy Domini, founder and CEO of Domini Funds, and research firm KLD. Companies that have too much involvement in commodities like alcohol, tobacco, gambling, and firearms are not included in the DS400. Since inception of this index in 1990, it has returned an average of 12.1% per year, slightly outperforming the S&P 500 over the same duration.PowerShares WilderHill Clean Energy (PBW)
This is not a mutual fund, but rather an exchange traded fund. PBW was recently featured in a Motley Fool article called “7 Ways to Win With Energy.” This ETF, which is based on the WilderHill Clean Energy Index, has been on a steady increase in 2007, up 31% year-to-date and 89% since inception in August 2004. It invests in companies that stand to benefit as our society moves towards cleaner energy usage and conservation. 80% of this ETF's assets are invested in the common stock of companies that advance such technologies. It is a pretty large focus on a single group and certainly non-diversified, but if you want green, it doesn't get much greener than this. Evergreen Solar, First Solar, Inc. and FuelCell Energy are a handful of the companies represented in this particular ETF.it's not easy being green
With so many large- and small-scale companies jumping on the green bandwagon, choosing which to invest in is no easy task. But if environmental issues are high on your priority list and you have money to invest, it's worth looking into the myriad of options available to you. And the above suggestions really are just the tip of the iceberg. So go green, and get some green while you're at it.Resources:
http://www.urscorp.com/
http://www.forbes.com/
http://ge.ecomagination.com/site/index.html#media/2006ecoreport
http://www.bp.com/sectiongenericarticle.do?categoryId=9015629&contentId=7029077
http://www.stanford.edu/group/efmh/winds/global_winds.html
http://www.hokuscientific.com/
http://www.cecoenviro.com/
http://www.greencentury.com/
http://www.domini.com/
http://www.kld.com/indexes/ds400index/performance.html
http://www.wildershares.com/
www.fool.com
http://investor.wgint.com
www.towertechsystems.com
www.gwec.net
www.sec.gov
www.ascentsolartech.com
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