“Barack Obama won this election on a platform of change, and the regulatory changes are likely to be very positive for environmental investing,” said Bozena Jankowska, lead portfolio manager of the Allianz RCM Global EcoTrends Fund and head of the RCM Sustainability Research Team. "The type of stimulus President Obama is proposing represents a significant opportunity for investors. More broadly, the tone, intensity and content of the debate in Washington is changing and that’s what is really important.”
Conducted for the second year in a row, the poll of 1,264 adults examined investors’ understanding of and attitudes toward the environment from an investor’s point of view. The poll was conducted via the Internet between December 12 and December 19, 2008 by GfK Roper Public Affairs & Media, a division of GfK Custom Research North America. Participants had to be age 25 or older and have primary or shared responsibility for investment decisions in households with financial assets of at least $100,000. The sample was weighted to match the characteristics of the total online population in terms of gender, age, household asset level and region, according to the U.S. Census. The same methodology was used for the survey conducted December 14-20, 2007, which yielded 1,003 completed interviews.
Hope (and Confidence) Springs Eternal
Even though 2008 was a turbulent year for the broader markets, survey data reveal that investors are still generally optimistic, and they are particularly constructive on the environment.
In fact, 72% of survey respondents say the recent decline in stock prices has had no impact on their inclination to invest in environmental stocks and about half (48%) of investors say they are at least somewhat likely to invest in these types of companies within the next year.
“The need for pollution control, clean water and energy efficiency is not going away. Investors perceive there is real opportunity here and they want to capitalize on it,” said Brian Gaffney, Managing Director and Chief Executive Officer of Allianz Global Investors Distributors.
According to the survey, investors continue to view the environmental technology sector as a “buy,” with 64% classifying the environment as the most desirable investment opportunity of the 10 categories surveyed.1 Further, there was a 30% increase from 2007 to 2008 in the number of investors who say they have already made investments in companies that are capitalizing on environmental trends (17% in 2007 versus 22% in 2008).
“Investors’ bright outlook on the environmental technology sector is telling. This is perceived as a long-term opportunity,” said Gaffney. “Investors understand that robust demand for innovation and solutions will fuel growth, and consequently profits, for years to come.”
Beyond the environment, investors are generally optimistic. Fifty-two percent say the Dow Jones Industrial Average will be higher a year from now than it is today.
Here Today, Here Tomorrow
Investors perceive that environmental issues will be long-lasting and thus present a large and enduring investment opportunity. Better than nine in 10 survey respondents (91%) believe that finding solutions to environmental problems will be a major issue for years to come, and nearly seven in 10 (69%) say it is important to look at investments in companies that are capitalizing on addressing environmental problems.
Addressing and solving these problems has become a top-tier concern of policymakers and opinion-makers. Social commentators and authors such as Thomas Friedman and Daniel Esty have opined there is tremendous opportunity to create economic value by innovating in the environmental space, and survey respondents agree. The survey found that nearly eight in 10 investors (78%) say environmental technology has the potential to be the next great American industry.
"Government investment in the environment, and in alternative energy in particular, will be an important engine for economic renewal in the Obama administration," Jankowska said. "During his inaugural address, President Obama said ‘We will harness the sun and the winds and the soil to fuel our cars and run our factories.’ This is a positive for the U.S. economy and job creation, and for the advancement of the environmental technology sector globally.
"At the same time, accelerating industrialization in emerging markets will continue to spur the need for environmental technologies. That has not changed despite the broader economic slowdown," Jankowska said. "We believe it’s possible that we are in the early stages of a long-term secular up-cycle for environment-related companies."
Even with current oil and gas prices relatively low, there is evidence that investors are now taking a longer view when it comes to the environment. Nearly all investors (97%) say that exploring alternative fuel sources for the future will remain important even if gas prices come down.
American investors see room for progress, and perhaps catch-up, at home. Fifty-eight percent say Europe is ahead of the United States when it comes to addressing environmental problems.
Seeking Help to Go Green
According to the survey, investors are eager to learn more about environmental technology and the related investing opportunities, and they are looking to financial advisors for help. Better than two out of three (68%) of all survey respondents agree they would need to consult a financial advisor for help investing in the environment.
Among those already investing with an investment professional, 78% say that even though the market has been performing poorly, they are still looking to their financial advisor to bring them interesting investment opportunities. However, 85% of those said their advisor had yet to recommend an environment-related investing opportunity. The securities of any single industry such as environmental securities tend to be more volatile than the stock market as a whole, and smaller companies may have limited operating histories and be at a more vulnerable stage of growth.
“This is a rapid growing and rapid-changing sector of the market, so investors are looking for help to smartly and profitably participate,” Gaffney said. “Innovation in environmental technology is occurring at an increasing pace and on a global scale, so evaluating the opportunities may be difficult for individual investors. Financial advisors can help investors navigate the space and in turn, professionally managed products offer advisors access to experience, technical expertise and diversification in this complex sector.”
