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The Green Advisor: More Investors Going Green, But Advisors?

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During his first State of the Union address on January 27, President Barack Obama said, “The nation that leads the clean energy economy will be the nation that leads the global economy, and America must be that nation.” Although getting the legislation passed and implementing the programs to bring that about are likely to entail a protracted battle, there are signs that American investors are in agreement.

A recent survey of 1,000 U.S. investors conducted on behalf of Allianz Global Investors found that more than half of the respondents plan to invest in environmental technology, including clean energy, over the course of the next year. This marks the third consecutive year that the survey was conducted and it shows a 70% increase since 2007 in the number of investors who say they are capitalizing on environmental trends (17% in 2007 versus 29% in 2009). Other top-line findings: 73% think that enacting policies to promote “green” practices and technologies will have a positive impact on economic growth; and 57% believe that the recent push to create “green” jobs will help turn around the economy.

Participants in the poll, which was conducted online between December 28, 2009 and January 12, 2010, had to have primary or shared responsibility for investment decisions in households with financial assets of at least $100,000. The sample was weighted to match the characteristics of the total online population in terms of gender, age, household asset level, and region, using United States Census Bureau metrics.

When Allianz Global Investors conducted the survey in 2008, more than three-quarters of investors said that they expected the Obama Administration to do more to promote business investment in new environmental technologies in its first year than the previous Administration did in its eight years. A year later, 49% said that Obama has done as much as he should to promote environmental investment. They think even less of Congress, with only 34% of investors indicating that they think the current Congress has done as much as it could to promote investment in environmental technologies. Although there has been a notable increase in investor interest in environmental technologies, what’s up with the 71% of investors who are not capitalizing on environmental trends?

The Message for Advisors

The Allianz Global Investors survey also contained some good news for advisors, if they can get on the environmental investing bandwagon. More than two-thirds (69%) of all survey respondents indicated they felt the need to consult a financial advisor for help in investing with an environmental sensitivity. Among those with an advisor, more than three-fourths (76%) think that their advisor is at least somewhat knowledgeable about environmental investing, while half (50%) think it is important that their advisor bring them more environment-related investment opportunities. Unfortunately, 72% of those investors indicated that their financial advisor has never recommended an environmental investment.

Interestingly, of those respondents whose advisors have recommended such investments, only 11% of the advisors positioned the choice as the socially responsible thing to do. For 38% of advisors the reason was simply that it was a good investment, and for 44% it was a good investment that was also socially responsible.

Misunderstanding “Green”

In the opinion of Bozena Jankowska, head of the RCM Sustainability Research Team and lead portfolio manager of the Allianz RCM Global EcoTrends Fund, much of the resistance to environmentally oriented investing is because many people don’t understand the concept. “It means different things to different people,” she said during a telephone interview in mid-February from her office in London, “and I think that’s where the confusion lies.”

Jankowska thinks that for a lot of investors the notion of “green” gets tied up with the idea of socially responsible investing and with screening out companies, thereby reducing the size of the investable universe with a corresponding negative effect on returns. On the contrary, she says, green investing in “clean” technology is a long-term play and the investors who are getting into it do so for the long-term capital appreciation benefits. Taking sustainability issues into account is a positive factor in stock selection, not a negative, she argues.

Jankowska says that “to me, green investing is purely a way of being able to capitalize on the deployment of green technologies; it’s not being driven by any ethical or moral concerns.”

Jankowska explains that RCM tries in its sustainability portfolio to invest in companies that have good qualities in managing their financial, environmental, social, and governance performance. The analysts try to match up environmental, social, and corporate governance (ESG) factors with performance versus competitors over the long term. “We found that this approach doesn’t necessarily restrict the investable universe, but what it does is come up with a universe of companies which we view to be best of class.”

Skeptics Abound

Although more than half (52%) of the Allianz Global Investors poll participants indicated that they agreed to some degree with the statement that “global warming is much ado about nothing,” Jankowska indicated that she was surprised by that response and thought such sentiments stemmed primarily from misunderstanding the data and from the natural human desire to ignore potential crises until it’s too late to do anything about them.

One of the reasons Jankowska says she’s hopeful that the skeptics will eventually come around was the attendance at the Copenhagen climate change summit in December, particularly the number of heads of state in attendance, including President Obama.

“They could easily have sent number two, number three, number 10 if they didn’t see it as an important event where they needed to be present themselves,” she says. “To me that says a lot.”

We’ll have to wait until next year to see whether investor attitudes shift any more in favor of environmental investing, but you can find the full results of this year’s survey here.

Managing Editor Robert F. Keane can be reached at [email protected].