Wealth - Seeking Socially Conscious Returns

Expert advises caution: “Green” trend could fizzle like tech stocks


As Earth Day (April 22) approaches, investors may hear more about “green” investing. Listen to environmentalists if you will, but also listen to wealth managers and other financial advisers.

Jim Casey, president and CEO of Palm Springs-based Integrated Wealth Management, had a client in 1989 interested in investing in a progressive recycling company. “He told me going forward he only wanted to invest in the environment,” Casey recalls. “My response was the same as it is today: As an investor, the first thing you always look at is the viability of the potential investment and whether it fits your priorities.” 

Fred Fern, chairman and CEO of Los Angeles-based Churchill Management Co., shares similar advice: “The wrong approach is to look at a stock or mutual fund just because it is green,” he says. “Go with the leadership and the investment cycle that it rotates in. Green may be in now, but it can also go out as quickly as tech stocks did.”

Often, green investing opportunities depend on future technologies, products, or services. Emerging technologies and young companies give investors the often-false assumption they can strike it big.

“We see investors intoxicated by the stories behind these companies, and they lose focus on the important principles,” says Lloyd Kurtz, chief investment officer at Palo Alto-based Nelson Capital Management, a money management firm owned by Wells Fargo. “We look at companies that have full commitment to environmental sustainability as a strategic objective,” Kurtz adds. “Firms with shorter-term time horizons are more likely to adopt piecemeal environmental practices without thinking enough about how the whole puzzle fits together.”

Just as with any other investment, successful money and fund managers pass on investing in a green company unless it has been in business for at least three years. They look for seasoned management with a strong track record.

Atmosair Solutions of Fairfield, Conn. — a 6-year-old company that markets and installs air purification products — recently topped $2 million in revenues. “We spent the first two years doing nothing but testing and obtaining certification and approvals,” says CEO Steven Levine. “There is lots of R&D required with anything green.”

Levine cautions investors to “be wary of products that sound great but are really smoke and mirrors.”

Boston-based Winslow Management Co. only invests in green through Winslow Green Mutual Funds. Considered a pioneer in green investing, it was founded in 1983 by Jack Robinson. “We see huge opportunities with companies that are helping mitigate climate change in renewable fuels, solar, and geothermal energy,” he says. “You want to invest in the leaders in their particular space. Technologies are moving so fast that if you don’t have deep pockets and a company with a strong business model and management, you won’t make it.” As more state and federal mandates take effect, Winslow also considers the green building-products market attractive.

“As a market sector, green companies are generating normal returns or in some cases slightly lagging the S&P overall,” observes Jim Estes, associate professor of finance at California State University, San Bernardino. “Tax credits will certainly help. If the Feds come up with strong investment tax credits, they will move the market. Returns could hit 20 to 30 percent long term.”

No doubt green investing is emotion based for some investors. “The green mutual fund sector has lots of investors who have money and want to feel good about what they invest in,” says Scott Lummer, director of research for the Savant Group in San Francisco.

Morningstar Inc. follows more than 300 “socially responsible investing” funds, which include green mutual funds.

If going green makes you feel good, then carefully consider your investment choices.  Act responsibly — as you would with the environment. 

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