YES, says Duncan Glassey, founder of Wealthflow LLP:
"It would be relatively easy for me to present short-term economic factors against the success of 'green investing'. There are plenty of them: the fall in the oil price has made energy from alternative sources much less economic; finance for new technology is much harder to come by; increased risk aversion among investors means fewer people are prepared to back blue-sky companies; big corporates have weightier things on their minds than burnishing their green credentials. And so on.
But that would be missing the point - which is that green investing had become yet another fashionable investment bubble, one that shared the shortcomings of every other investment bubble.
Green investing is concept investing. You're being encouraged to buy into the idea that certain types of companies can deliver above-average returns because demand for their products, services and technology is growing unusually rapidly. Even leaving aside the fact that innovation itself is rarely a guarantee of high returns, this idea is flawed - because high returns only ever come with increased risk. Yet the concept of a risk premium is rarely discussed by green investing cheerleaders.
Now is the time to listen to a smarter story. In the long run, the only way to invest is to build a diversified portfolio which minimises volatility and focuses on returns across the entire spread of assets and geographies. Don't fall into the trap of being talked into individual strategies and new paradigms such as 'green investing'.
Maintaining a focus on diversity and overall returns in the face of a bandwagon is hard, and investing themes don't come much bigger or more powerful than saving the planet. Nobody wants to miss out on big gains, however ephemeral they may turn out to be. Staying true to your investment aims requires real discipline. Unfortunately, the majority of stockbrokers and IFAs continue to peddle crystal-ball gazing as professional investment management, buying and selling based on hunches and perceived wisdom.
How to do it? A belief that markets work and are efficient, and that capitalism is productive and virtuous, is a good place to start. Stick to the plan, and don't get distracted by the investment fads of the day."
Wealthflow is an Edinburgh-based wealth management firm. www.wealthflow.com
NO, says Mark Robertson, Communications and Development Manager at EIRIS:
"You might think that governments and companies, under acute financial pressure in the midst of a grim recession, would be quietly burying their commitments to cutting carbon emissions and waste.
In fact, they're doing the reverse. At the recent G20 summit in London, leaders pledged to "make the best possible use of investment funded by fiscal stimulus programmes towards the goal of building a resilient, sustainable, and green recovery"
Major economies including the US, UK, China and Korea have announced detailed green stimulus packages as part of their recovery plans. Clean energy and efficiency comprise about 14 per cent of the American Recovery and Reinvestment Act of 2009. Not only will does this help to bridge short-term funding gaps of green technologies which might arise from the economic downturn, it also sets the scene for longer-term sustainable growth.
Climate change is financially significant to companies, too. It presents a systemic risk, and the Stern Review clarifies the threats posed to the economy and the financial impact of not addressing climate change. Increasingly, major companies recognise the long-term commitment that is needed to address climate and other key environmental issues. Despite the economic downturn, major companies such as Marks and Spencer are sticking with green initiatives, as they recognize the significant efficiencies to be gained in doing so.
The short-term slump in commodity prices is unlikely to affect the long-term economics of renewable energy sources. Growth in emerging markets alone will push up energy prices in time, while mandatory carbon reporting, the increased roll-out of emissions trading and America's desire to reduce its reliance on imported oil will all make alternative energy economically more attractive.
Despite the financial crisis and economic recession, renewable energy continues to attract significant interest from investors. A recent Deutsche Bank survey of institutional investors representing over $1 trillion in assets, found that 49 per cent are 'more likely' or 'much more likely' to increase their exposure to green energy now than they were a year ago.
It’s likely that governments, companies and investors will continue to provide the crucial long-term global support for green industries that’s needed to mitigate climate change and build a more global sustainable economy."
EIRIS provides independent research into the social, environmental and ethical performance of companies. www.eiris.org.uk
