We are a foreign institutional investor and have noticed the increasing popularity of market awareness and funding for green energies and other environment-related programs. We also heard that green funds have become trendy in the arena of investment due to the high return in green technologies. Is this just a fad or can we expect sizable returns and stable development in this sector?
We have seen some very interesting new development with regards to green energy in the United States and how the government is providing attractive debt rates for this sector. We do not believe this is a "new fad" and returns will remain satisfactory for some time.
I represent many clean tech companies and have looked at many green and environmental funds. I think these types of funds are becoming more popular, but not at an accelerated rate. At the end of the day, the funds are only going to invest in technology that has been proven. That’s the hard part. There are many clean tech and environmental companies that are in the seed stage that claim that they are disruptive and innovative, but the underlying technology hasn’t gone through the testing phase. For a green fund to invest based off on untested technology would be merely a gamble and, at the end of the day, the funds have to generate a return.
As it relates to investments in infrastructure or funds that invest in infrastructure, new, greener technologies are certainly a trend that can be expected to continue in some measure. As it relates to the real estate industry directly, most new buildings include some level of LEED certification, as do major retrofits, both done to be socially conscientious and to attract tenants. I would expect both of these to continue. However, I have not seen investments specifically in environmentally motivated projects for the sake of green, and would not expect to see that as the main purpose of an investment in the U.S. anytime soon.
It’s a fad, pretty much just niche play for a few. The current U.S. administration and head of EPA are not very “green conscious."
My experience with green funds has been first rate. That is, because I have worked with savvy investors who are concerned about the results as well as the returns, I am seeing a definite desire to invest in healthy buildings, which has long been promoted by the Urban Land Institute. This is an idea that's here to stay, but choose the fund carefully.
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