Turning green into gold

Last year for example, Clipper Windpower, a California-based turbine maker whose shares are listed in London, tripled in value from 300p a year ago, to around 925p, giving the company a market value close to £1bn. The global market for windpower that is already worth £4.5bn a year and is expanding at 15-25% per annum.

Another example is Climate Exchange, a  carbon trading firm, whose shares raced from £3 each in September last year to £16.30 - valuing the company, which has only just turned a profit, at nearly £680m.

More and more clean energy companies are getting listed on the London Stock Exchange's Aim market, which has become the predominant global trading place for green-themed, often high-tech, company launches.

At Jupiter, Charlie Thomas runs the 18 year old Ecology Fund, currently sixth out of the 205 funds in the "global growth" unit trust sector. More money has poured in during the last three months than ever before.

"Everyone assumes green funds are now about energy, but we're also invested in energy efficiency plays, which are equally important." He's been buying stocks such as SIG (Sheffield Insulation Group), which is expected to benefit as the construction industy is forced into building low- carbon homes.

Mike Fox, fund Manager of CIS Sustainable Leaders Trust, is ranked 19th out of the 254 funds in the UK unit trust sector. He says:

"The recent good performance of environmental-focused companies is the beginning of a trend and not the end of one."

Jamie Allsopp, who runs New Star's Hidden Value fund, is another manager from outside the traditional ethical investing community who has been betting on climate-change related shares. A tenth of his fund is now in green stocks such as Trading Emissions (up 28% since March), Camco (up 50%) and Ecosecurities (up 47%). He also likes Renewable Power & Light, a New York utility which is currently converting two gas-fired stations into biodiesel. Like many clean energy companies, they operate outside the UK but are beating a path to the door of the London stock exchange to be listed in Britain, which has a lighter regulatory regime and an investment community which is more open to climate change ideas. He warns investors to be highly selective: "Some of the wind turbine companies are looking pretty pricey," he says.

Windpower is a major theme in the Merrill Lynch fund: both Clipper Windpower and Vestas of Denmark are key holdings (it has more than doubled in price since last year), as is Florida Power & Light, the largest windpower developer in the US. Its shares have jumped from $54 at the start of the year to $64 today.

Neil Woodford runs Invesco Perpetual's £14bn worth of income funds, and is one of the most respected fund managers in the UK. Controversially, he has in the past invested in tobacco companies, but three years ago, he started buying shares in climate-change related stocks, and thinks we are still at just the start of a long green business cycle. He has bought a stake in Clean Energy Brazil, a producer of bioethanol from sugar cane. "There are all sorts of distortions in the ethanol market, such as government subsidies. But one thing for sure is that ethanol from sugar cane is climatically more sensible, and economically more viable, than making it from corn in the northern hemisphere," says Mr Woodford, who himself owns a farm in Devon.

Woodford owns a 21% stake in Climate Exchange, and is not planning to sell out despite the stunning rise in its share price. "I believe the volume of carbon traded [on exchanges such as Climate Exchange] will, in the future, dwarf bond and equity markets. It will be the single biggest commodity market in the world." He accepts that lots of clean energy concepts "will burn bright then disintegrate very quickly" but pick the right one, and you could make a fortune.

But if investors want to profit from climate change, they have to think laterally, he says. "It's wrong just to look at explicit green vehicles. Climate change is now impacting our investment view even of companies such as Tesco. It's likely that climate change will raise the price of goods and services, so, for example, out-of-season strawberries in Tesco will have to reflect the carbon cost of bringing them in from abroad."

Solar power is seen by most investment managers as more risky than windpower. Merrill Lynch likes Solar World AG of Germany, but New Star's Allsopp warns that, on the whole, solar has been less promising for investors:

"Between January 2001 and 2006 share prices of solar companies went up just 26% - and if you strip out one Chinese company, ReneSola, they've actually fallen. Dozens of Chinese solar firms have raised hundreds of millions of pounds from Western investors over the past year, which they are ploughing back into the labour-intensive - but low profit margin - business of cranking out solar panels.

Small investors can profit from the green boom through buying Aim-listed shares cheaply through online dealing services, however Aim stocks are notoriously volatile and this type of investment is not for those looking for a guaranteed return.

A safer option is to buy into specialist funds such as Jupiter Ecology, Merrill Lynch New Energy Technology and CIS Sustainable Leaders.

Motorists need green incentives

A new survey has found that most drivers would be willing to drive greener cars if they get some financial benefits. This follows recent research from financial advice site The Motley Fool, which also concluded that while most consumers are willing to go green, they need to be offered tangible financial benefits.

Research by Virgin Money found that drivers would be prepared to pay an extra 4.8 per cent more for a new car if it has lower carbon emissions, although the majority of motorists stated that they would be more willing to do so if they receive incentives such as tax breaks and cheaper car insurance.
Jason Wyer-Smith, from Virgin Money, comments: "There needs to be more carrot and less stick to encourage more people to make the move into lower carbon emission motoring. Insurers can do their bit by looking at special deals for greener cars but the government has to play its part too." He warned that motorists are being threatened with higher petrol prices and more expensive parking instead of being offered positive incentives.