A Green Energy Investing Guideline
by Louise Harris, Investment U Research
Typically, when investors think about making money from climate change, they think about buying shares of companies that specialize in biofuels or alternative or green energy.
But those aren’t the only ways to profit from the green movement.
Deutsche Bank Group (NYSE: DB) recently conducted in-depth research, analyzing climate change and the cost of combating it. And a few very interesting conclusions came from it…
- More capital is required to mobilize climate change industries and more action by government is required to attract capital.
- When governments offer tax incentives and create integrated plans to combat climate change, investors are attracted.
- Carbon markets could offer long-term solutions to investors trying to find a niche in the climate change debate.
And there are countries out there doing just that.
The Greenest Countries In The World
If you like wallabies, surfing and relatively safe green energy investments, look no further than Australia. Between 2000 and 2008, the country invested US$5.4 billion on climate change.
Brazil, China, France, Germany and Japan are also on board. They all offer strong incentives, a consistent approach to the topic and mandates that drive capital flow.
That’s in contrast to countries like the U.S., Canada, India, Indonesia, Mexico, Russia, South Africa, South Korea and the U.K. While they’re not anti-green, investment is based more on market-driven incentives, which are more volatile in nature, since they’re tied to stock exchanges.
And despite their flaws, those countries have invested significant amounts of money to combat climate change over the past decade. In particular, the U.S. and Canadian governments continue to encourage incentives to push green investments.
Alternative Energy Investments: Follow The Green Signs
Of course, just because a country has policies that address climate change doesn’t automatically make them for good alternative energy investments. So here’s a quick guide of what you should look for certain criteria before they put their money where some other nation’s policy is, including:
- Long-term plans that include consistent, secure and predictable payments.
- Incentives that decrease over time, as technologies move toward market competitiveness.
- Strategies that eliminate non-economic barriers, such as access to grids or administrative obstacles.
- Open and fair distribution channels.
Certain mutual funds such as Charles Schwab & Co. Inc.’s Laudus International MarketMasters Fund (Nasdaq: SWOIX) make the investing process a little easier. With a Morningstar rating of four stars, it has produced an average 7.02% in returns since 2004.
Good investing,
Louise Harris
P.S. For more on alternative energy investing and the green movement, check out our other in-depth Investment U columns from our resident energy specialist, Dave Fessler. He’s written several columns, focusing on global warming, alternative energy investments, solar energy, and wind power.
- Two Investments to Add to Your “Green” Portfolio
- Alternative Energy: Why You Can’t Ignore “Green” Investing
- Four ETFs Profiting From Green Energy
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