The Green Sheet
Green Your Green™ Winter 2009
Recognizing the impact and positive potential of your investment dollars.
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Green Investing Update Renewable energy and clean technology investments did not escape the horrendous declines in the 2008 stock and bond markets. With revenues and profits growing, what went wrong? Economic growth -- or the lack thereof -- is partially to blame. Many of the firms in the solar, wind, geothermal, and green energy segments are young companies with significant capital and financing needs. As lending and the sources of capital vanished, fears about these firms' ongoing operating abilities took hold.
International stocks suffered more than domestic stocks in 2008 and most companies in this segment are based outside of the United States. A strengthening U.S. dollar made matters worse for U.S.-based investors.
In the latter half of 2008, falling oil, natural gas, and commodity prices made alternative-energy investments less attractive. Although reduced energy demand should be cause for celebration, it has been both a psychological and an actual detriment for clean energy development.
However, despite this backdrop, the public's interest in renewable energy and energy efficiency continues to grow. We expect the new administration to support research and development, while the supply of oil, water, and other commodities continues to decline as populations increase. Additionally, the perils and costs of climate change should hopefully promote a better business environment for this sector.
Enthusiasm for these stocks sometimes led to inflated prices from 2005 through 2007. Fears produced the opposite in 2008. Now with valuations at 10 to 20 times earnings, many stocks are trading at attractive prices, potentially representing an excellent opportunity for long-term investors.
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Will SEC Better Protect Investors in 2009 and Beyond? Last year was surely the worst year in the history of investor protection and Wall Street regulation. The SEC -- the Securities and Exchange Commission -- whose mission statement says it will "strengthen the integrity and soundness of U.S. securities markets for the benefit of investors," not only failed to catch Bernard Madoff's multi-year, multi-billion dollar Ponzi pyramid, but also allowed banks to claim inflated asset valuations, ultimately leading to the collapse of Bear Stearns and Lehman Brothers and a financial crisis that has severely impacted all investors. Not surprisingly, investor confidence and public trust in the markets has been battered. During the past several years, corporate interests were greatly protected, while shareholders were stymied in their ability to file resolutions and ask for full financial disclosure.
However, shareholder advocates are optimistic that the SEC may soon return to its mission and investors will benefit from greater transparency and oversight. The Obama administration's choice to head the SEC, Mary Schapiro, represents an opportunity to reform the SEC, just as she has reformed Nasdaq and FINRA, the Financial Industry Regulatory Authority. Schapiro is a knowledgeable veteran with a record of reasonable regulation and she has been appointed to jobs by both Republicans and Democrats.
Investors must engage policymakers to achieve a more accountable and sustainable capital market system. Organizations such as the ICCR and INCR, fund families such as Domini, Pax World, and Calvert, and others have already approached the administration for change. To see their letter and its signatories, click here.
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