If you want to know what the next big thing in green tech will be, just follow the money.
Environmental interests have typically been viewed as antithetical to those of business and industry. But given recent trends in venture-capital investments, it seems that those days are over. In fact. 2006 saw a 78 percent increase in green-tech investing, and in 2007. U.S. venture-capital firms pumped $2.6 billion into green technology in the first three quarters. Green is in. and this year could see t he development and production of technologies that both alleviate environmental impacts and change the very ways in which we conduct our lives.
"Green technology companies have a moral attraction and distinct political appeal for liberals, moderates, and conservatives alike." says Rachel Wexler, a partner at law firm Goodwin Proctor who specializes in private equity. But there's more to the growth of green-tech investments than just ideals: Venture-capital backing is spearheading research that will make eco-friendly technology economically competitive.
The majority of green-tech deals—and development—is going toward the clean energy sector, it's simple supply and demand." says Wal van Lierop, president and CEO of Chrysalix Energy Venture Capital. "We currently drill for 83 million barrels of oil a day, and by the end of the next decade we will need 250." And with the price of oil ever rising, companies are aggressively searching for renewable energy alternatives at competitive prices.
While green start-ups are exploring dozens of different energy solutions, almost all of these ventures entail high risk for investors. "Green technology investing is absolutely not for the faint of heart." cautions van Lierop. Jonathan Silver, a managing partner at Core Capital Partners, agrees, pointing out that though developing a green energy alternative can be expensive, actually building new factories and power plants requires yet more capital. It can also take far longer to experience any returns made on these investments.
TOP GREEN-TECH EARNERS
New Alternatives (NALFX)
One of the pioneers of green investing, this specialty equity fund (established in 1982) emphasizes the environment and alternative energy by investing in alternative energy, biofuels, and fuel-cell technology. Returns in 2007 were more than 33 percent.
Spectra Green Fund (SPEGX)
Encouraged by Bill Clinton's group CGI (Clinton Global Initiative), the Spectra Green Fund is a multi-cap growth fund that invests in companies such as Google. On Semiconductor, and GFI Group. This fund saw one-year returns in 2007 of over 26 percent.
Domini Social Equity Portfolio (DSEPX)
Along with investing in green technology, products/services. and human rights, this large-cap equity fund also imposes "social filters" that prohibit investment in companies that deal with alcohol, tobacco, gambling, and more. This fund was down more than 3 percent in 2007.
MMA Praxis Value Index B (MPVBX)
Like the Domini Social Equity Portfolio, this MMA Praxis fund also imposes numerous social filters, along with investing in green technology. This fund dropped more than 7 percent in 2007. As a general trend, funds that use such social filters tended to underperform in 2007.
Source: Frank Washburn - PC Magazine