In his State of the Union address, President Obama issued a challenge to America to produce 80% of its electricity from clean energy sources by 2035. This ambitious initiative would require an almost unprecedented partnership between government and the private sector and will certainly be controversial.
More recently, the interior department announced a $50 million program to expedite the development of wind farms off the coast of the mid-Atlantic states, as well as a $25 million program to support new and existing wind turbine technologies. While these stately turbines are good in theory, the reality is much more controversial. It took eight years for final approval of the nation’s first wind farm off the coast of Cape Cod, over opposition from environmentalists, Indian tribes and the tourist industry.
While several large players, including General Electric and Vestas Wind Systems, are at the forefront of wind turbine technology, there are smaller companies in the sustainable power industry that may become tomorrow’s blue chips and industry leaders. There are many funds that focus on sustainable energy; here are a few worth looking at.
PowerShares, one of the most active sponsors of exchange traded funds, has several offerings that cover alternative energy. PowerShares Cleantech (PZD) recently trading at $27.77, is an exchange traded fund designed to track a proprietary, equally weighted index of stocks of publicly traded clean-tech companies. It has $147 million assets, and annual expenses of .71%.
PowerShares also has an ETF that invests in wind energy. The Global Wind Energy Portfolio tracks the Clean Edge Global Wind Energy index, including manufacturers, developers and distributors of energy derived from wind sources. This fund has annual expense of .75% of assets, and recently sold at $10.33 per share.
A third alternative is the Global Alternative Energy ETF offered by Market Vectors. This fund, now holding $134 million in assets, seeks to track the Ardour Global Index, a capitalization-weighted universe of listed companies engaged in alternative energy, alternative fuels and related technologies, with a market cap exceeding $100 million. This fund has an expense ratio of .66%.
Prudent diversified investment in sustainable energy can offer tremendous opportunity. These funds, however, should be considered concentrated because of their sector orientation, exclusionary selection criteria, relative small size and risk factors associated with overseas investing. With these cautions in mind, select your sector investments with an eye toward your overall asset allocation and investment plan.
Steven Weber is the senior investment advisor and Frank Weber Director of Operations for The Bedminster Group, providing investment management, estate, and financial planning services. The information contained herein was obtained from sources considered reliable. Their accuracy cannot be guaranteed.