Friday, April 22, 2011

Earth Day Gold

By John F. Wasik

The best Earth Day investments

A visitor places her hands on a "Tangible Earth", a digital globe which real time global metrological data is fed through the Internet from about 300 places in the world, is displayed at an exhibition pavillion inside the media centre for G8 Hokkaido Toyako Summit in Rusustu town, on Japan's northern island of Hokkaido July 6, 2008.  REUTERS/Yuriko NakaoAll that’s green isn’t gold.

As we wring our hands over another Earth Week amidst the Gulf oil spill anniversary and the Japanese nuclear crisis, it’s hard to remember that we can’t buy or invest our way out of our current predicament.

We need to redefine how we can become better stewards of our planet. While I think we need a moon-program-sized clean energy and resource preservation plan, it won’t come by buying green products and investments.

Case in point: I was recently solicited by Green Alpha Advisors, LLC, which says it performs “money management for environmentally focused capital.” They manage funds in a separately managed account offered through brokers that invest in a host of environmentally friendly companies.

Since I was solicited through email via The Sierra Club, a revered environmental group that I’ve been a member of for many years, this firm has a verdant endorsement for investors like myself. All of the right keywords in their marketing materials sounded good: clean energy, smart grids, sustainable commerce and zero-carbon transportation. So far, so good.

Their “Sierra Club Green Alpha Portfolio” returned 6.44 percent from inception (Dec. 27, 2010 through Feb. 28, 2011), compared to 5.85 percent for the broad-based Russell 3000 Index, so that had a good ring to it as well. Then I started to dig into the fee structure and the picture became grayer.

Green Alpha was charging an annual minimum management fee of 2.95 percent if you invested less than $50,000; they lowered their fee to 1.79 percent if you had at least $100,000 under management. There were also additional transaction charges (through the broker Charles Schwab) for “the buying and selling of securities in your account.”

I was also piqued that, unlike an open-ended mutual fund or exchange-traded fund (ETF), I didn’t get full disclosure of all of the stocks they held in their portfolio. The manager stated in an email that “only our current clients have access to all of the securities in the portfolios,” although they seem accommodating in that “management fees are negotiated on a client-by-client basis.”

In the ETF space, you can own a lot of green stocks for a lot less. Let’s say you wanted to concentrate on solar-energy stocks, not a bad bet as we still gape at the horrors of nuclear power and the perils of oil, coal and natural gas.

The Market Vectors Solar Energy ETF, will give you a sampling of this sub-sector. Its annual management expense ratio (in addition to a brokerage transaction fee) is 0.65 percent annually.

An even better approach is to avoid betting on just one technology and to spread bets across several promising sectors. The PowerShares Cleantech Portfolio ETF invests in an index of more than 70 stocks across the world. They charge 0.67 percent annually.

Will investing in these portfolios prevent climate change or reduce U.S. dependence on fossil fuels? Not directly. Yet if you can extend your philosophy of green investing into daily practice and political activism, you may have a much more meaningful impact.

Our family not only recycles more than we throw out, we compost our kitchen waste to make soil. Although we’d like to drive less in our suburban locale, when weather permits, we take our bikes to the supermarket, library and hardware store. We patronize local farmer’s markets and try to grow much more of our own food — and freeze or can it.

Will some of this lead us to a cleaner environment? It won’t without a big, clear voice asking our politicians to support clean and smart energy policy through a renewable energy portfolio standard — literally mandating that we get away from fossil fuels by a certain date. We have the technology. All we need is the political will and the ability to price carbon and its harmful effects on the environment.

It doesn’t matter whether you believe climate change is caused by man or not. Supporting clean energy and resource conservation is the right kind of stewardship for the finite gifts of our planet. That’s an investment that keeps on paying dividends.

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