Green ETFs: Investing in the Future of Energy

Aug. 11, 2008 - PRLog -- In the current issue of Fidelity Independent Adviser’s ETF Report, publisher Don Dion examines a new breed of ETFs designed to offer investors opportunities in “green investing.” “The ETF Report (http://www.fidelityadviser.com/readMe_ETFr.asp)is released monthly,” Dion said, “so we try to cover important trends that are impacting the market right now.”

In an election year in which “going green” has been worked into every campaign platform, Dion examines the ETF community’s response to “investing green.” “While some “green” ETFs— like First Trust’s ISE-Revere Natural Gas Index Fund (FCG)— have been on the market for some time,” Dion noted, “there has been a recent influx of other ETFs that will benefit from a more environmentally aware investing community.” Dion himself believes that “energy alternatives will be important, perhaps necessary, to meet the country’s energy needs in the future.”

In the ETF Report’s (http://store.fidelityadviser.com/etfreport1yr.html) feature article, Dion discusses four different ETFs that fit the bill of “green investing”: PowerShares Global Wind Energy (PWND), the Claymore/Mac Global Solar Energy Index ETF (TAN), the First Trust ISE-Revere Natural Gas Index Fund (FCG) and iPath Global Carbon ETN (GRN).While GRN differs in its tax structure, being an ETN, the other products also offer opportunities to invest in up-and-coming energy alternatives.

“While wind energy is not a new idea,” Dion remarked, “it has recently experienced a flurry of publicity in the wake of T. Boone Pickens’ proposal.” PWND is a global ETF, and while the implementation of plans in the U.S. might boost the fund, Dion remains mindful that: “PWND captures the ‘big picture’, both in the U.S. and abroad, by investing in developers, distributors, installers and users of energy derived from wind sources worldwide.” http://www.fidelityadviser.com/readMe_ETFr.asp

In his second segment on solar, Dion notes that, “while solar power is certainly not a new investment, it is one niche that ETFs make more accessible to the general population.” The Claymore/Mac Global Solar Energy Index ETF (TAN) seeks to mirror the MAC Global Solar Energy Index, which is designed to track certain business segments of the solar industry. The index includes companies that produce solar power equipment and fabrication products or services related to solar production. “As the price of producing solar energy falls,” Dion said, “solar power will be a viable alternative for a larger percentage of the population.”

Dion also believes that further development of natural gas may make the First Trust ISE-Revere Natural Gas Index Fund (FCG) a good buy. “FCG’s index is composed of companies that derive a defined portion of their revenue from the exploration and production of natural gas,” Dion said, “these companies might offer investors even greater returns as natural gas becomes a more appealing alternative for oil.” Dion also noted that: “scientists are now estimating that nearly a third of the world’s natural gas is lying untapped beneath the Arctic. With the U.S. Geological Survey predicting that more than 84% of untapped oil and natural gas is offshore, a move toward natural gas will be a move up for FCG.” http://www.fidelityadviser.com/readMe_ETFr.asp

While the first three ETFs that Dion covers invest in energy alternatives, he groups a fourth ETF, iPath Global Carbon ETN (GRN), with “green investments” because the fund’s methodology is tied to the reduction of carbon emissions. “One of the greatest threats facing our environment is emissions that result from current energy production,” Dion said, “as businesses throughout the world expand their use of oil and coal, greenhouse gas emissions are increasing.”

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The 1997 Kyoto Protocol called for a reduction in greenhouse emissions. In order to meet restrictions levied by the resulting treaties, some countries began to adopt a market-based policy approach to emissions trading. Through the open market trading of allowances and credits awarded to companies through this system, investors outside of the carbon emissions industries can now gain exposure to the emissions trading market.

“GRN’s ‘bet’ is that as global warming awareness increases and as oil prices climb,” Dion said, “carbon-related credit plans will become increasingly important.” With countries like the U.S. developing similar carbon reduction plans, an index like GRN’s could grow to include global credit plans in the future. “Whether it is an investment in the reduction of current emissions, or the development of clean energy technology,” Dion said, “ETF issuers continue to develop an array of ‘green investing’ opportunities.”
http://www.fidelityadviser.com/readMe_ETFr.asp

About Fidelity Independent Adviser’s ETF Report: Offering 5 ETF portfolios, the ETF Report strives to keep subscribers well-informed before making investment decisions. With more than 70,000 subscribers in the United States and 29 other countries, Fidelity Independent Adviser publishes four monthly newsletters and three weekly newsletters. Its flagship publication, Fidelity Independent Adviser, has been published monthly for 11 years and reaches 40,000 subscribers. http://store.fidelityadviser.com/etfreport1yr.html

Publisher Don Dion is also president and founder of Dion Money Management, a fee-based investment advisory firm to affluent individuals, families and nonprofit organizations, where he is responsible for setting investment policy, creating custom portfolios and overseeing the performance of client accounts. Founded in 1996 and based in Williamstown, Massachusetts, Dion Money Management manages more than $700 million in assets for clients in 49 states and 11 countries. A licensed attorney in Massachusetts and Maine, Mr. Dion has more than 25 years’ experience working in the financial markets, having founded and run two publicly traded companies before establishing Dion Money Management. http://www.dionmm.com/

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