Ethical investing: The Obama effect
Industry-watchers consider the future of renewables, defense, and other sectors.
A new administration means a new beginning – for voters and investors. Its new policies will change the economic landscape, creating new winners and losers among companies and industries. What should ethical investors look for? To find out, the Monitor’s Laurent Belsie spoke recently with two experts: Jack Robinson, president of Winslow Management, which runs two green-investment mutual funds, and David Wood, director of the Institute for Responsible Investment at Boston College. Here is an edited version of their conversation. (The views expressed here are for informational purposes and do not represent an endorsement by The Christian Science Monitor.)
The economy looks dreary. Can investments thrive during the Obama administration?
Mr. Robinson: Unequivocally yes.... The way we view it is that in many instances many stocks have already seen their lows, particularly ones that are well managed and leaders in their industry and, from our point of view as green investors, the leaders in particular green areas, many of which are the focal point of the new administration. So we’re seeing a lot of interest, a lot of excitement, and increasing volume in buying activity in a broad range of what we call green companies offering green solutions.
So things are looking up.
Robinson: The daily news continues to be very bad.... But again, markets anticipate better news.... That is what the market is saying – that this, too, will pass, probably later this year.
How much impact can a change in president have?
Mr. Wood: I don’t think we’re going to know for some time, really, how the Obama administration is going to change what the responsible investment community is concerned with. We’ve certainly seen a lot more talk about corporate transparency, about a sterner hand over corporate disclosure. These are issues of longstanding concern for responsible investors. We’ve seen, slowly, an increase in attention toward the successes of community development finance institutions, which seem to have outperformed their larger peers in the banking industry.
Mr. Obama wants to double alternative-energy production in three years. What does that mean to green investors?
Robinson: Certainly, the lowest-cost, lowest-carbon renewable-energy producers are going to be beneficiaries no matter what happens. So, if you look carefully at the solar and wind and geothermal spaces on the production side, they will benefit – and already have benefited, frankly – from things going on in regional areas, in states, in cities.... There was a wonderful stimulus part of [the congressional spending package] that extends the life of tax credits, which may get turned into cash rebates, based on the way it’s going. So on the production side, it’s very positive. And the other side, what we’d call the low-hanging fruit or the energy-efficiency or conservation side, as well, they’re going to be beneficiaries, too.
You mentioned that community-based financial institutions had done better than their larger brethren. How much better?
Wood: They weren’t packaging off their mortgages. They tended to use 30-year fixed rate mortgages instead of adjustable-rate mortgages that would explode on people. They’re notorious for doing due diligence on the people they lend to, and they’ve proven there is a model for lending to low-income people that is sound. That’s the upside. The downside is that the communities they’ve lent to are going to be extremely affected by this downturn.
Are there specific companies that will thrive?
Robinson: In the solar space, the leading company is a company called First Solar. They have the leading technology. They are two years ahead, really, of the typical silicon panels that are being installed.... In the wind space, unfortunately there are no direct plays in the US, because most of the wind technologies are offshore. But I think the leader in that space is a company called Vestas, which does do a lot of turbines here in the US and is building a plant. In the geothermal space, and by geothermal I’m talking about small-scale geothermal, shallow geothermal, which is used for residential and commercial, there is a company in Fort Wayne, Ind., called WaterFurnace. It’s a very small, wonderful little company that continues to grow and pays a dividend and has no debt.... On the efficiency side, there’s a broad range of ways to do that. But I think one of the most interesting ones is in the metering. As you know, you can’t manage what you can’t measure. And so, meters are increasingly important. And the leading company in that space is Itron.
What industries should ethical investors avoid?
Wood: Coal is certainly going to face significant scrutiny going forward.... I think the price on carbon is going to determine a lot of the shakeout and what happens to the markets under the Obama administration.
Robinson: You want to avoid, in my opinion, most fossil fuels because the price is going to continue to go up. Coal is the worst offender. But oil isn’t far behind. And there will be others. I would think that defense companies wouldn’t thrive under the new administration. If we’re going to reduce our presence in the Mideast, or at least try to, that means we’ll reduce some of our spending.... So that would be an area that I’d be very careful not to be involved in.
• Watch the entire conversation at CSMonitor.com/ethicalinvesting.