Few investors embracing alternative-energy funds - Tim Paradis

Most U.S. investors see putting money into alternative-energy companies as both potentially lucrative and a way to support the environment. But while many might see opportunity, few are taking it.

A recent survey by Calvert Group of Bethesda that coincided with the establishment of an alternative-energy fund found that while about 85 percent of investors believe there is money to be made from investing in areas such as solar power and wind power, only about 20 percent of investors have broached the subject with a financial adviser.

Calvert, which manages a big chunk of its money under precepts often referred to as "socially responsible investing," is hoping investors will start acting on their beliefs and invest in the Calvert Global Alternative Energy Fund.

"It really shows we're at a tipping point for public concern about this," said Paul Hilton, director of social investment strategy at Calvert, referring to the poll of nearly 1,100 investors conducted by the firm Opinion Research.

"There have been a lot of people coming to us because of concerns about climate change. The number one reason why investors are with us is because they care about environmental issues."

He said that $5 billion of the company's $15 billion in assets under management are invested using socially responsible investing principles, which, for example, espouse notions of environmental stewardship and labor practices that don't exploit workers.

But while investors might feel good about such investing, there are potential pitfalls.

"It is a long-term play," Hilton said. "There is no question that within this area you're going to see some volatility in anything this specific.
Investors should be aware of that.

"What's exciting is you can look at other times in history when there has been a major evolution in how things are done," Hilton said. "We can see that these technologies are competitive in a way that they haven't been before."

Jeff Tjornehoj, an analyst at fund tracker Lipper, sees reason for investors to remain cautious.

"There's certainly some growing investor interest in it," he said. "I think they're grabbing a lot of the investors who are interested in alternative energy because energy prices are high right now."

Last week light, sweet crude topped $70 per barrel on the New York Mercantile Exchange for the first time since August amid tight U.S.
supplies.

Tjornehoj questions, however, whether interest will remain should prices recede. He also said investors should remain vigilant when considering any investment that appeals to them for reasons beyond the financial implications.

"If when you see this fund you have a strong emotional response, that should warn you off of this as an investment idea until you have a better sense of why you would want an alternative-energy portfolio."

Tjornehoj said that if prices for energy and commodities in general remain at higher levels, it could signal an important change for investment opportunities. "You might look back on this Calvert fund as the beginning of something very lucrative," he said.

John Quealy, an analyst who covers alternative energy for Canaccord Adams, contends opportunities for the sector are increasing.

"A lot of funds have done well investing in the theory 'Get clean and then the profits will come,' " Quealy said. He said investors should consider their tolerance for risk; much opportunity from alternative energy could come from finding ways to conserve energy not just finding new sources.

"We're seeing this tipping point of industry really grabbing hold from a philosophical-regulatory standpoint that says, 'I need to prepare my business today for a carbon-constrained environment in five years,' " he added.