Climate Change Summit: Green Investing Returns

As everyone from oil company CEOs to Al Gore heads for Copenhagen, clean-energy investment already is revving back up

By Mark Scott

Over the next five days, top names from the worlds of business and environment policy will gather in Copenhagen for the World Business Summit on Climate Change. From Tony Hayward, chief executive of oil giant BP (BP) to Al Gore, the former U.S. Vice-President-turned-environmental-activist, participants will focus on one theme: How will the global recession affect green investments made to combat global warming?

The outlook turned sharply negative earlier this year. In the first quarter, worldwide investment in green energy projects of all kinds plunged 53% compared with the same period in 2008, to $13.3 billion. U.S. energy companies such as FPL Group (FPL) and American Electric Power (AEP) postponed billions of dollars' worth of wind farms and solar parks. And the chilly debt markets made raising capital for eco-friendly programs a hard sell.

But that picture is already starting to brighten. After raising just $100 million from the debt and equity markets in the first quarter, green energy companies have scared up $2 billion in the second quarter so far. "The appetite for higher-risk, higher-return investment is coming back into fashion," says Angus McCrone, chief editor at London energy consultant New Energy Finance.

Discussions at the Copenhagen summit are expected to focus on this more promising future. The event is one of several being held around the world this year in the runup to the big climate change conference in Copenhagen in December, where policymakers are expected to hammer out a successor to the Kyoto Protocol.

Global Government Investment

There's little doubt that tackling global warming creates business opportunities for companies willing to take the plunge. Governments worldwide already have pledged billions to fund eco-friendly programs—everything from green energy research and development to tougher auto-emissions standards. Tighter regulation, including a long-awaited U.S. federal carbon-trading scheme, also means polluters will have little choice but to invest in energy savings.

"Governments are throwing money at the green energy sector," says Roman Webber, European renewables leader at consultant Deloitte. "Once banks start lending again, business will recover quickly."

There's plenty of interest out there. A recent survey by Deutsche Bank (DB) and New Energy Finance found that three-quarters of institutional investors, such as pension funds and asset managers, expect to buy into clean technology projects over the next three years. Renewables and energy efficiency are the top two sectors targeted for investment.

Clean energy—far and away the largest green sector by market value—is the first choice for many investors. U.S. President Barack Obama has carved out about $80 billion from his $787 billion economic stimulus plan to kick-start spending on renewable energy.

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