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Sharp Curves Ahead

With global financial markets unravelling and being reconstructed, near-unanimous recognition that many aspects of human economic activity are putting our planet in peril, and new leadership in the US pledging to support science and the environment, surely the time has finally come for the ascension of ‘green’ business.

Part of October’s US “financial bailout” bill, the Emergency Economic Stabilization Act, granted a wide variety of incentives for clean energy, including:

  • extension of solar tax credits until 2016;
  • extension of wind tax credits until the end of 2009;
  • extension of business tax credits for fuel cells;
  • new business and residential tax credits for geothermal heat pump systems; and
  • new tax credits for building energy efficiency, such as energy efficient lighting, efficient heating/cooling and building insulation.

President Obama is pushing for a massive stimulus package concentrating at least in part on modernizing energy infrastructure, and he is also prioritizing a wide range of major energy initiatives, from investment in plug-in hybrids, to hard national targets for renewable energy generation, to aggressive goals for lowering overall carbon emissions and increasing overall energy efficiency.

The environmental imperative to change our energy consumption patterns was recognized decades ago, but financial markets were not receptive when the dollar cost of going green far outweighed the dollar cost of remaining hooked on oil and coal. Today, advances in clean technologies and manufacturing efficiencies of scale are bringing us to a point where the financial costs of going green are on the verge of reaching par with the old fossil fuel driven economy, which now teeters and begs for bailouts.

Here is the latest market commentary from a firm named Winslow Management.“The cost of traditional electricity and the cost of renewable electricity are converging rapidly, and we are on the verge of the holy grail of renewable energy, “grid price parity”, when those two costs become equal. There is no exact date for reaching grid parity – depending on local pricing conditions and other factors, grid parity will roll across the country over several years. According to data from BP, in areas such as Northern California and Hawaii, solar has already achieved grid parity. The significance of grid parity for the renewable energy industry cannot be overestimated – the vast majority of electricity consumers are focused on price and nothing else, and once dirty energy has no cost advantage over clean energy, the door will finally be open to adoption of renewable technology on a massive scale.”

There are a variety of ways to invest in a greener economy, regrettably most involve opening a US$ investment account, since the vast majority of these securities are trading on US markets. This of course means that such investments will suffer if the US$ loses value against the Cdn$. There are but a handful of mutual or exchange-traded funds priced in our own currency that would give broad exposure to a green shifting economy.

One of the more promising, and a recent arrival to the Canadian market, is the Jovian Winslow Global Green Growth Fund, which seeks to invest in “securities of issuers located in Canada and throughout the world that provide “environmental solutions” or that have established themselves as “environmental pioneers” in their industrial or commercial peer group.”

Jovian Capital, a Canadian investment manager, has retained the Winslow company as sub-advisors to this fund. Winslow has been around for 25 years and is widely recognized in the US as a pioneer in the field of green investing. The firm is a member of the American Council on Renewable Energy, the U.S. Green Building Council, the Ceres Coalition, and the Social Investment Forum; a signatory to the U.N.’s Principles for Responsible Investment (PRI), and an active supporter of the Carbon Disclosure Project and the Investor Network on Climate Risk.

The latest report from Jovian Winslow Global Green Growth Fund lists the following top holdings, comprising around 40% of the fund’s assets:

  • Itron Inc. – company is the world’s leading provider of solid-state meters—electricity, water, gas and heat—and data collection/communication systems, including automated meter reading (AMR) and advanced metering infrastructure (AMI) technology.
  • First Solar – designs, manufactures, and sells solar electric power modules using a proprietary thin film semiconductor technology
  • Avista Corp. – an energy company, engages in the generation, transmission, and distribution of energy, primarily from hydroelectric and thermal sources.
  • Ormat Technologies – engage in the geothermal and recovered energy power business in the United States and internationally. It operates in two segments, Electricity and Products. The Electricity segment develops, builds, owns, and operates geothermal and recovered energy-based power plants, and sells electricity. The Products segment designs, manufactures, and sells equipment for geothermal and recovered energy-based electricity generation;
  • Novozymes AS ’B’ – a Danish company that is a world leader in producing enzymes and microorganisms that are used to convert waste biomass into ethanol, clean wastewater, and scores of other environmentally friendly applications
  • Telvent Git Sa – an information technology company, provides solutions to customers in energy, traffic, transportation, and environment industries worldwide. Their environmental protection activities include air quality and continuous emissions monitoring; meteorology and hydrology; and water and wastewater management.
  • WaterFurnace Renewable Energy – a leading manufacturer of residential, commercial, industrial and institutional geothermal and water source heat pumps.
  • Energy Conversion Devices – develops and produces proprietary thin-film solar modules.

If change is indeed upon us, then an investment allocation to the emerging green sectors of the global economy would look like a sensible thing to do, and this fund is one of the better options available to Canadian investors.

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