Obama gives green energy funds a jump-start
In the wake of yet another monster storm in the Northeastern U.S., we are once again reminded of the need to address climate change, which is like a Grendel that keeps coming out of its cave to ravage us with increasingly violent weather.
The President outlined new initiatives on climate change in the State of the Union address on Tuesday. If they gain traction in Washington, it will give a boost to stocks and exchange-traded funds that invest in alternative energy and global warming solutions.
"If Congress won't act soon to protect future generations, I will," President Obama said. "I will direct my Cabinet to come up with executive actions we can take, now and in the future, to reduce pollution, prepare our communities for the consequences of climate change, and speed the transition to more sustainable sources of energy,"
It is difficult to say how these proposals, which have been bandied about Washington for years, will make it through a Congress more focused on fiscal issues and spending cuts. Yet even a modest increase in funding for alternative energy or a cap-and-trade carbon emissions program can revive a beleaguered sector. Here are some of the funds and stocks that will benefit:
CLEAN ENERGY FUNDS
The clean energy sector, which has been lagging because of uncertainty over public investment and tax credits for alternative energy in the U.S., is due for a turnaround. A proposed "energy security trust" may provide the funding for these ventures because it will "use some of our oil and gas revenues to drive new research and technology to shift our cars and trucks off oil for good," President Obama said.
The PowerShares WilderHill Clean Energy ETF (, one of the largest funds by assets in this sector, is down 21 percent over the past three years and off 26 percent over the past five through January 30. Its holdings include the solar-energy company Suntech Power Holdings Co Ltd and Gentherm Inc, which makes alternative heating and precision climate control equipment, among other devices. The fund has returned 3 percent through January 30. It could benefit from increased investment in clean energy.
INFRASTRUCTURE FUNDS
Another outgrowth of green energy will be smart- and micro-grids. As witnessed by the devastation of superstorm Sandy, it may no longer make sense to string exterior wires from pole to pole from a central power source. When energy infrastructure is being upgraded - and it badly needs it in the U.S. - it makes sense to make it more efficient and greener as well.
One leading energy infrastructure-focused fund is the PowerShares Cleantech portfolio, which holds companies like Schneider Electric SA, the German energy management company; and BorgWarner Inc, which makes fuel-efficient powertrain systems.
The portfolio also holds Siemens AG, the German technology company, which has an international energy division. It was singled out by President Obama in his speech, who said the company's American division might add jobs if the U.S. upgrades its infrastructure. As a giant in energy systems, Siemens, along with its U.S. competitor General Electric Co, would likely see contracts emerging from grid improvements.
GLOBAL SOLUTIONS
Since no one company or country will corner the market on clean-tech solutions, it is also useful to invest in diversified global portfolios. The Pax World Global Environmental Markets fund holds companies like China Everbright International Ltd and Johnson Controls Inc.
Hong Kong-based China Everbright focuses on environmental protection and alternative energy technologies such as waste-to-energy and biomass. Johnson Controls focuses on sustainable energy solutions such as batteries and building efficiency. The fund is already seeing an uptick - rising 19 percent last year. It could extend its gains if the broad clean-energy sector gains attention.
At the very least, sustainable capitalism and adopting a paradigm for change is the larger goal here, not just alternative energy. As former vice president Al Gore remarked in a speech on February 8 at the Chicago Council on Global Affairs, a comprehensive approach will require more than just new energy standards and technology, it will demand a "global mind" that's committed to long-range solutions and not political and economic "short-termism."
As it stands now, we are paying an ever-steeper price for climate change. If we don't make investments in a comprehensive suite of solutions, the cost of inaction will only compound.
Reuters
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