If you’ve been following our postings, you know that green investing is one of the hottest topics in the investment world today. In part 1, we wrote about green projects you might invest in, investment funds that are certified green, and an “individual” approach where you apply a personal set of criteria.
We’re all for green investing, but like any other investment strategy, green investments aren’t without their hazards. As investment professionals for nearly ninety years, the staff at KerNors Capital Group realizes that knowing the risk is part of fashioning a good strategy. In part 2 of our green investing series, we outline some of those risks and what you can do about them.
Going Green Doesn’t Mean Ignoring Fundamentals
Our earlier article quoted an investment advisor reminding clients to compare companies across a sector using personal criteria such as corporate governance and environmental responsibility.
The same New York Times article chronicled the case of “socially responsible” investor Sarah Kupferberg who wanted to invest in green companies, not the big industrials her parents had preferred. But like most novice investors, she stumbled along the way, once putting money into a company that was trying to use buoys to turn ocean waves into electricity. She admits that she “...made a lot of bad choices.” She notes that, although “...these were companies at the leading edge of technology. They weren’t great investments.”
Instead, Garvin Jabusch, chief investment officer at Shelton Green Alpha Fund, advises clients that “this doing good while doing well thing is getting to be a bit out of date.” Their advice is to focus on fundamentals.
The takeaway here (and the advice we’ve given clients since 1924) is that every investment deserves careful evaluation of its fundamentals.
Dig Deeper To Understand The Real Potential
Writing in Forbes, author Hilary Kramer gives everyone a reality check by noting that “...the real inconvenient truth of the clean technology boom has been that too many of the business models were less sustainable than the ideas.”
That doesn’t mean that Ms. Kramer recommends shying away from these green investments. Far from it, as she writes a glowing profile of the Aravaipa Venture Fund, a distinctly progressive fund based out of Boulder, Colorado. But although she uses the most complimentary of terms, neither Ms. Kramer, nor fund founder Robert Fenwick-Smith will describe the fund as green or clean.
Perhaps that is a nod to high profile “casualties” like Solyndra (which Kramer dutifully mentions in her article). Either way, Fenwick-Smith’s approach is certainly one of careful research and a gradual approach: over the past five years the firm has only taken a position in nine companies.
Good research and a careful, strategic approach. That’s good advice for any investor.