June 20, 2007
Forget Fossil Fuels, Calvert Now Offers Global Alternative Energy Fund
by Anne Moore Odell
Calvert releases a survey of US investors on climate change and expands its family of funds with an
alternative energy fund.
When the recent "Calvert Climate Change/Alternative Energy
Survey" interviewed US investors, more than three-quarters of respondents expressed concern
about global warming and its ramifications. Yet few investors have taken their concerns about
climate change to their financial professionals, with only 20% of investors responding that they
have considered investing in alternative energy.
Notwithstanding the fact that few
investors have moved their investments to alternative energy, most investors (85%) surveyed by
Calvert think that investing in alternative energy is an opportunity to make a profit while helping
mitigate climate change. Calvert, hoping to
help investors put their money where their environmental concerns are, has recently launched the
Global Alternative Energy Fund (ticker: CGAEX). Dublin-based KBC Asset Management
International (KBCAM) was named
Calvert, headquartered in Bethesda, MD, is already a leader in socially
responsible funds and is deeply involved in fighting climate change. Calvert currently has more
than $15 billion under management. Their new Fund joins a small, but growing list of alternative
energy funds and ETFs currently on the market from competitors
surrounding increasing the country's ethanol supply certainly have increased press, as well as
investor interest [in alternative energy]," said Annie Sorich, Mutual Fund Analyst at Morningstar, an independent
provider of investment research. "Investment companies are interested in alternative energy because
there is significant demand from their clients."
Alternative energy sources are usually
alternatives to fossil sources such as oil, coal and gas. Calvert's new Fund will invest in
alternative energy providers (such as solar, wind, geothermal, biofuel, hydrogen, and biomass), the
technologies that enable these sources to be tapped, and the services or technologies that conserve
or enable more efficient use of energy. The Fund will invest at least 80% of its net assets in
companies involved in alternative energy.
Interestingly, Calvert's new Fund may consider
companies that are involved with nuclear power. However, they will only do so if the companies are
also working to develop renewable energy and if they meet Calvert's safety and security standards
in the performance of their nuclear power operations.
The sub-advisor, KBCAM, will use a
combination of quantitative and fundamental investment processes in evaluating potential
investments for the Fund. Their initial step is the development of the investment universe. The
universe is evaluated based on long-term, strategic allocations for each sub-category within the
alternative energy sector. Fundamental and qualitative models further evaluate stocks from the
bottom up. Top-down views on industries, sectors, or regions act as risk controls during portfolio
"KBCAM was chosen because they are a leading SRI firm whose principals have
expertise in the fast-growing, nascent alternative energy sector, a long history of socially
responsible investing, and a strong reputation in multi-cap global investing" explained Steve
Falci, Calvert's Chief Investment Officer of Equities.
KBCAM was one of the first global
mutual fund managers to launch an Alternative Energy fund in 2000. As of Dec. 31, 2006, KBCAM had
$20 billion in total assets under management and $3.5 billion in socially screened assets,
including their Alternative Energy portfolio.
Jens Peers, Head of Eco Funds at KBCAM,
explained to SocialFunds: "We apply a thematic strategy and the starting point in terms of the
stock picking methodology is to identify those themes which will outperform over a two year time
period. These include, for example, access to poly-silicon for solar companies, the extension of
the Production Tax Credit in the US for wind farm operators, and increasing grain prices for bio
"Once these themes have been identified, our research effort is focused on finding
the best stocks that can harness the potential in each sector, based on fundamental research. Our
stock picking methodology is focused on identifying superior companies and then buying such
companies at prices which represent a discount to fair value," Peers continued.
estimates that the fund will have exposure to at least 20 different countries, including some
emerging markets. Emerging markets will be represented in the Fund with a focus on the Asian
emerging markets, especially China. Peers noted that these markets have enormous growth potential
in terms of Alternative Energy investments, and are supported by recent local government
Sorich of Morningstar points to some of the risks of the Fund. Investing in
any sector fund carries significant event risk. "If governments decide to pull their subsidies of
alternative energy, the underlying stocks of the portfolio will suffer. In addition, given the
intense investor interest in these companies, it will be difficult for the portfolio managers to
find companies that are available at reasonable prices" Sorich said." In addition, energy is a
sector that's dependent on commodity prices, making the companies subject to price swings, which
could introduce increased volatility to an investor's portfolio. "
In addition to filing
climate change resolutions at companies, Calvert has been actively working with other organizations
to broaden the impact of its climate related advocacy efforts. Calvert recently joined with 60
other investors, asset managers, and companies in a Legislative Call to Action, a formal call for
federal climate policy. Calvert is also part of the Carbon Disclosure Project, the Investor Network
on Climate Risk, the Responsible Property Investment Project and plays a key role in two United
Nations Environment Programme Finance Initiative (UNEP FI) working groups, the Climate Change
Working Group and the Asset Management Working Group.