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January 31, 2008

Growing Interest In Green Investing
    by Anne Moore Odell

New research shows that individual investors think the environment is hot, with solar energy an important investment opportunity. -- Investing in the environment is rich soil to till, reports a survey released by Allianz Global Investors. Almost half of those surveyed said that in the next year they are likely to invest in a company or fund that is proactive on environmental issues.

The survey of over 1,000 adults on the environment and investing was conducted by GfK Roper Public Affairs & Media for Allianz.

Seventy-one percent of investors surveyed said that environmental technology was a "buy" and the most desirable sector to invest in. Fifty-four percent of those surveyed listed investing in the environment as an "important focus" for their future investments.

"With going green going mainstream, investors are interested in better understanding the investment opportunity presented by the environment," said Bozena Jankowska, portfolio manager of the Allianz RCM Global EcoTrends Fund and head of the Sustainability Research Team for RCM. "And what we found from our survey confirms this."

One interesting aspect of the survey is its attempt to measure investors' general knowledge on both the environment and investment. About three quarters of those surveyed said that they know at least a fair amount about the greenhouse effect and the Energy Star energy efficiency rating. A similar number of investors also said they knew last least a fair amount about mutual funds.

Although investors might think themselves informed on environmental issues and investing, 73% of those polled said they would consult a financial advisor for insight on environmental investing. More telling, perhaps, is that 83% of investors said that their current financial advisors hadn't to date suggested environmental investing.

Jankowska said, "What surprised us most is that 17% of investors are already investing in the environment. That number was higher than we expected. In addition, nearly half said that they plan to invest in the environment in 2008. I would point to our own EcoTrends Fund, which was met with enthusiasm by investors. So we are seeing demand build for these types of products."

Sixty-two percent of investors replied that solar energy was a major investment opportunity. Over 50% of respondents also agreed that wind power, hybrid vehicles, and water purification present major investment opportunities,

"In December, there was some uncertainty and nervousness in the market from the passing of the US energy bill, which excluded provisions for alternative energy such as wind and solar, but included support for biofuels, increased car efficiency standards and energy efficiency," explained Jankowska. "Although this provides some uncertainty in the short term, we believe that alternative energy legislation and support will be extended but most likely in a separate bill at some point in 2008."

Support for alternative energy is also strong on the state level, with 20 states having established targets for alternative energy use.

Jankowska also pointed to other trends that suggest the potential for long-term growth in the alternative energy, clean water and pollution control space, even in light of the current turbulent market. One reason for the increase in alternative energy investment is the Chinese government's increased environmental focus. Other developing markets with growing energy demands are also helping drive the growth in alternative energy.

"Furthermore, issues such as energy security and diversification are all factors that will fundamentally support the growth of alternative energies as well as technological advances and grid parity (as is the case with wind power in the US), which will further stimulate demand for alternative energies in the future," added Jankowski. Can you explain grid parity?

Businesses should note that the report states that a large majority of investors (84%) believe that the better a company addresses sustainability issues, the more profitable the business will be.

"When it comes to the environment, social value and economic value are not mutually exclusive. In fact, they are increasingly linked," said Blake Moore, Managing Director and CEO of Allianz Global Investors US Retail. "The greater the focus on the environment, the greater the need for safeguarding or remediation - and that equates to innovation and robust demand for services."

Political candidates should take note as well. Liberal and conservative voters stand together on the issue of the environment and green investing: 36% of self described liberals say they are likely to make an environmental investment in the next year, as do 41% of self described conservatives. And a whopping two-thirds of all voters say that a presidential candidate's record on the environment will impact their vote.

Of course, it is still to be seen if investors will actually act on their intentions and invest in environmentally friendly funds and companies. Yet this survey shows that the green investing sector is on investors' radar in 2008.

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