As the world community has grown more attentive to environmental concerns, such as global warming and climate change, the presence of related investment opportunities has greatly increased, driving robust growth of green investing in 2007, as per a recent Merrill Lynch and Capgemini report.
Whether perceived as an investment opportunity or a responsibility of global citizenship, overall participation in green initiatives has risen rapidly in recent years due to the fundamental need for sustainable development, and, as a result, the undeniable growth potential of the green sector.
Furthermore, it seems the era of economically viable green power has finally arrived, as the impact of soaring oil prices on consumer attitudes and the widespread acceptance of global warming implications converge. Individuals, businesses and governments alike are actively pursuing the integration of green initiatives into everyday systems and investment strategies, adapting to and preparing for what is quickly becoming the way of the future, the report says.
Typical green buildings
Capitalizing on the fundamental strength of demand for green initiatives, the investment community has been particularly invigorated by the attractive financial returns of green investments that have accompanied the already appealing environmental and social benefits generated.
In much greater size and proportion than in recent years, investors have been supporting innovative research and development initiatives in search of alternative fuels, renewable energy and other advanced technologies. Today, investors are presented with many vehicles through which to back green initiatives, such as mutual funds, ETFs and other pooled products or alternative investments.
In 2007, these investment vehicles drove robust growth in green sectors. For example, total investment in the clean technology sector increased to $117 billion in 2007, up 41 per cent from 2005,114 with particular strength in the wind and solar segments. In fact, in the three years ending November 2007, gains in the wind segment exceeded 300 per cent, while solar posted the highest growth in 2007, roughly 150 per cent. Furthermore, the solar segment produced the highest proportion of IPOs of any green sector over the course of last year, including the Merrill Lynch-led $6.5-billion issuance of Iberdrola Renovables, the world’s largest renewable energy company.
Despite being burdened by poor overall market conditions in late 2007 and early 2008, green investing trends have been driven by an underlying commitment to sustainable development, which takes profit incentives into consideration alongside social responsibilities. As a result, the sector will likely weather short-term fluctuations and deliver strong returns in the long run.
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