Like no environmental issue before it, global warming has hordes of profit-minded public and private investors on the same page as environmentalists, seeking the next great wave of technological innovation. In order to detail ongoing green investment trends, VerdeXchange News was pleased to speak with Allan Emkin, founder and managing director of Pension Consulting Alliance, an organization that helps public pension and private equity investors find the best possible returns in an emerging market still full of untapped potential.
What trends are emerging from the broad spectrum of investment opportunities in today’s emerging green market? For example, what trends are emerging from dynamics such as small cap versus mid cap or specific technologies, such as solar, wind, or geothermal?
The range of the investment goes from small private companies that are being funded by venture capitalists to the largest public companies. There is no one area that is getting special attention, although clearly, energy is the area that is getting the most interest because of the change in economics of companies that can produce affordable energy—relative to today’s $100 per barrel of oil. Those energy sources have a real competitive advantage, and many investors and companies pursuing are that. There are also significant resources put into clean water, into all sorts of recyclables, and to other forms of clean energy.
Will windpower investment returns continue to offer the best returns over the long term? Will solar and photovotaics become the better alternative investment for money managers over time?
The issue is technology, and if solar technology gets to the point where it can generate more cost-efficient energy, then it will be the dominant source. At the present, anyone producing energy at a less costly basis than traditional sources—oil and gas—will have competitive businesses for the foreseeable future. The demand is far from being met.
What are the strategic opportunities for investment in green transport and infrastructure? PCA has been researching public/private infrastructure investment opportunities, and VC capital continues to flow into clean transportation startups such as Miles Electric cars or Tesla Motors. Do you anticipate both forms of transportation investments continuing? Are they complementary opportunities?
It is not really being coordinated, but they are contemporaneous and, in fact, parallel. Large institutions do, in fact, back Tesla, and many of the largest institutional investors who are committing capital to infrastructure programs do everything from making energy transmission more efficient to creating cost-effective mass transportation. These trends will continue, and over time, they will overlap.
The GreenXchange Global Marketplace Conference panel you moderated in December, “It’s About the Money! Public Pension and Private Equity Money Managers Assess Investment Risks and Rewards,” included an assessement by Danny Zalber from Piper Jaffrey that some of these spaces in clean tech are actually underfunded. Which spaces do you believe are underfunded? What segments of the renewables are overfunded?
There is no one area that could not consume significant amounts of additional capital. The only area where there is probably a surplus would be in early stage venture capital
U.S. public policy regarding renewables is clearly in transition. What federal and state legislation are you tracking that could change the way your clients, i.e., public pension funds, invest in clean tech and the green space?
Cities, counties, states, and the federal government are looking at creating carbon credit markets. They are addressing energy usage and new construction. They are looking at increasing the efficiency of motor vehicles. In each one of these areas, legislation and/or regulatory actions will have an increasingly significant impact on these investment markets.