Green investments with promise: the top five sectors for a solid return.
New technologies are inherently risky technologies from an investment perspective. Consider the controversy around Solyndra, the solar-panel maker in California that went bankrupt after receiving more than $500 million in loan guarantees from the Obama administration. But for every Solyndra is a success story--the next great energy-saving or waste-reducing device or technology seems always on the horizon.
Research WhitePaper (researchwhitepaper.com), a global company that produces reports and guides aimed at capital growth, asked 100 venture capital investors which subsectors of green technology they're most interested in. Below are the top five they've identified as having the most promise of financial return.
1. Energy Efficient Technologies
Energy efficient technologies include Energy Star-rated appliances, HVAC systems and lighting, among many other applications that have the potential to decrease both electrical and fossil fuel consumption in existing infrastructure. These technologies are popular with today's investors because they can be applied directly to existing buildings and generate cash quickly as they represent improvement rather than complete renovation and remodeling.
2. Recycling Technologies
Many parts of the world, including Asia and Africa, suffer from problems resulting from industrial and electronic waste produced by developed countries that's discarded in third-world countries. As a result, world governments have recently produced contracts to improve their recycling processes. Improvements to the process can include conversion of solid waste into energy and recycling materials into packing or building materials. Venture capitalists and green investors, particularly large construction, renovation and engineering companies, are supporting recycling technologies for their money-making potential.
3. Green Building Materials
One of the most important green building materials is cement, a major contributor to pollution from construction sites. Green alternatives--changing the composition, or adding fly ash among other methods--can decrease emissions, provide more efficient insulation and even save water when mixing processes are streamlined. Private investors in Europe, the Middle East and Asia (especially in regions with scarce water supply) have invested heavily in building materials that require less water to produce.
4. Water Resources Conservation
The evolution of green industries is as much about new technologies as it is about environmental conservation, including maintaining our fresh and salt-water resources. Water resources conservation includes diagnosis, water treatment and sustainable irrigation practices. Asian nations like Singapore, Taiwan and Japan have all made conservation of water resources a national priority. Singapore's success in this area has drawn huge investments from both the national government and venture capital funds.
5. Home Products
Home products always need to be replaced, creating many opportunities for manufacturers to earn money through rebate offers and other incentives. Green home products include low-flow showerheads, toilets and faucets; better insulated windows and drapes; paints with low or no volatile organic compounds; and solar panels for domestic water heating or rooftop-generated electricity.
Green Investments for the Future
Trillium Asset Management, LLC (trilliuminvest.com), based in Boston, Massachusetts, is a wealth management company that only purchases stock in companies that meet its standards regarding sustainability--environmentally, socially and economically. Trillium CFO Matt Patsky says that while his company wants to ensure that they do not do anything with investors' money that violates their core business principles of environmental and social justice, it is important to keep in mind that green investing can also be truly profitable.
"The results from environmental, social and governmental analyses performed on every company indicate that integrating these principles into investment strategy leaves you with long-term reduction in risk and better quality of management without sacrificing returns," Patsky says.
Regarding global markets Patsky says that the goal is "to try to get people to focus on living their lives in a more sustainable way by supporting enterprises, local economies and food production and carbon footprint reduction." He adds: "We need changes in consumption patterns which will allow us to invest in green companies and do well in the long run."
TAYLOR MCGRATH is an editorial intern at E.