Investors View Environment as Long-Term Opportunity, According to Allianz Survey |
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Written by U.S. Insurance News
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Thursday, 31 January 2008 |
What’s good for the environment could be good for an investor’s portfolio.
What’s good for the environment could be good for an investor’s portfolio.
A unique survey from Allianz Global Investors shows that individual investors view the environment as a major long-term investing opportunity.
Of the 1,003 investors surveyed, 49 percent said that over the next 12 months they were likely to invest in a company or mutual fund looking to provide solutions for environmental problems. Almost one in five (17 percent) reported having already made such an investment.
Bozena Jankowska, lead portfolio manager of the Allianz RCM Global EcoTrends Fund and head of the RCM Sustainability Research Team, explained that the environment is one of the few areas where both the public and politicians generally agree and are likely to act upon their view.
“The environment is a fertile investment area at an early stage of growth,” Jankowska said. Because many private citizens and public leaders share similar views about the importance of preserving and improving the environment, that will lead to more pro-environment legislation.
“As popular sentiment grows and legislation continues to tighten, technological innovation will accelerate, laying the groundwork for great investment opportunities,” Jankowska added.
The survey revealed five general themes about investors’ attitudes toward the environment.
1. Green issues are considered a “black” investment opportunity. Seventy-one percent considered environmental technology a “buy.” More than half (54 percent) said that environmental investing will be an “important focus” for them in the future.
“Our research shows that investors understand that significant environmental issues represent potential lucrative opportunities for businesses endeavoring to bring real solutions to a global market,” Jankowska stated.
2. Investors understand environmental issues. Seventy-three percent said they knew at least a fair amount about the greenhouse effect, and the same percentage said they knew at least a fair amount about the Energy Star energy efficiency rating. That compares with 77 percent who said they knew at least a fair amount about mutual funds.
Seventy-one percent of respondents said environmental investments offered the potential for long-term capital growth. In terms of specific investment opportunities, 62 percent said they consider solar energy a major investment opportunity, followed by wind power (57 percent), hybrid vehicles (53 percent), and water purification (50 percent). At the bottom of the list were ethanol (37 percent) and eco-tourism (17 percent).
Jankowska compared interest in environmental investing with that of investing in information technology in the 1990s—“popular attention, robust demand, high innovation, abundant capital, an enduring need and rising valuations,” Jankowska said. “We believe that we are in the early stages of a long-term secular up-cycle for environment-related companies.”
3. It’s a myth to say what’s good for business is bad for the environment.
“When it comes to the environment, social value and economic value are not mutually exclusive. In fact, they are increasingly linked,” said Blake Moore, managing director and CEO of Allianz Global Investors US Retail.
Eighty-four percent of the investors said a business’ profitability will be increasingly linked to its ability to address resource sustainability issues. Sixty-seven percent strongly or somewhat agreed with the statement that “global warming is a serious threat that businesses need to address in order to be successful.”
However, while investors believe the environment is a serious business issue, they also believe that many companies have yet to view it that way. Seventy-eight percent said most companies today focus on environmental issues for public relations value rather than financial value.
“The best companies are ahead of the curve, making substantial investment in their environmental business practices,” Jankowska said. “At the same time, we are seeing a paradigm shift in which environmental products and services are moving from the realm of corporate social responsibility or niche activities to core businesses that will generate significant future revenue streams.”
4. Investors want to learn more about environment-related investing opportunities, particularly from their financial advisors.
Seventy-three percent said they would need to consult a financial advisor for help investing in the environment. However, among investors with a financial advisor, 83 percent said their advisor had yet to recommend an environment-related investing opportunity.
“Success in this sector requires an understanding of the problem, the market, the competition and, in many cases, the ability to understand and evaluate a new technology,” Moore explained. “Investors are looking to their advisors for help, and many advisors are, in turn, looking for the experience, technical expertise, and diversification offered by professionally managed products.”
5. Contrary to conventional wisdom, concern for the environment is not just a liberal cause. Forty-one percent of those who say they are likely to make an environmental investment over the next 12 months describe themselves as politically conservative, compared with 36 percent who say they are liberal. Two-thirds of all investors say that a presidential candidate’s environmental record and positions will have at least some impact on their vote.
The poll was conducted via the Internet December 14–20, 2007, by GfK Roper Public Affairs & Media, a division of GfK Custom Research North America. Participants were at least 25 years old and had primary or shared responsibility for investment decisions in households with financial assets of at least $100,000.
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