How do investors factor climate change into their stock-picking equation?

Corporations are catching on to the risks and opportunities of global warming.

from the March 12, 2007 edition

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So investor strategy No. 1 is to avoid those companies that are most at risk. How do you find those firms?

Patsky: There are a lot of databases out there, like [those from] KLD and Innovest, that are providing that type of information. If you were to go to our website – www.winslow green.com – we have a whole section on sources of information for investors about environmental impact, and studies also showing the impact that it has on performance of stocks.

Investor strategy No. 2 might be called picking climate-change winners. How do you do that?

Patsky: The real opportunity here is solving problems. And something as simple as changing a light bulb can save 90 percent of electric use. There has to be a lot of opportunity for making money there. It's still at an early stage in a lot of companies. So trying to find the right names can be complicated. I'd say the smartest approach, in a very biased view, is to look for a mutual fund that looks for these types of solutions, because to try to go and buy individual companies is difficult.

A shameless promo for your mutual fund?

Patsky: My recommendation would be to go and look at our holdings, and look at the holdings of competitors like New Alternatives. There aren't that many green-solution funds in the US.... In Europe, there are a lot of them, though. So if you were really looking on a global basis, you could find a lot of green mutual funds to turn to.

What criteria do you use to look for climate-change winners?

Patsky: One of the single, most critical factors to the success of a company is the strength of its management. And that can't be quantified. You're interviewing them. And you're trying to get a sense of the quality of that management team.... We're small-cap growth players, so we're really looking at getting in early at a company that can be 10, 20 times the size they are now.

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