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August 19, 2009
Book Review: Investment Opportunities for a Low Carbon World
    by Robert Kropp

Thirty-one contributors to collection of essays edited by Will Oulton of FTSE Group analyze low-carbon technologies and related investment opportunities.

In his introduction to "Investment Opportunities for a Low Carbon World," Will Oulton, Director of Responsible Investment at FTSE Group, wrote, "A core part of the message of many political leaders to their citizens is that economic growth can be stimulated, in part, by an increasing focus on and investment in the technologies, infrastructure and services that will form a central part of the low carbon agenda."

"Investment Opportunities for a Low Carbon World" provides the reader with an in-depth tour of both the technologies that are most likely to flourish in a low carbon economy, and some of the investment opportunities that could arise with the transition away from an economy based on fossil fuels. With thoughtful contributions from representatives of many of the world's leading investment houses, the sustainable investor will find in the book the most up-to-date guidance available for making investment decisions.

The book is divided into three parts. Part I, entitled "Environmental and Low Carbon Technologies," contains essays devoted to both relatively well-established and emerging low carbon technologies. The analyses of wind energy, solar power, hydropower, geothermal, biomass, biofuels, carbon capture and storage, and heat pumps provide histories of the technologies, regional variations, the major manufacturers and producers in fields where economy of scale is becoming increasingly important, and recent technological developments. Throughout the essays, the conclusions of the contributors are supported by charts, tables, and verifiable statistical information, all of which provides essential data for informed investment decision-making.

Part I concludes with two essays specifically devoted to investing in a low carbon economy. In her essay "Energy Efficiency as an Investment Theme," Zoe Knight highlights the critical role that legislation must play for a meaningful reduction in greenhouse gas (GHG) emissions. And in his essay "Transport: Investing into a New Mobility Future," Michael Narberhaus of the WWF-UK argues that changes in such currently resource-intensive activities as mobility "will create new business opportunities in the existing low footprint industries or in new industries that become attractive to consumers and investors in a carbon and resource constrained world."

Part II, entitled "Investment Approaches, Products and Markets," provides the reader, according to Oulton, "with information on the ways that investors can identify, analyze, and track the performance of those companies operating in and providing services to environmental markets." Two essays in this section track the development of carbon markets, whose value was estimated at approximately $100 billion by the end of 2008, and could grow to $550 billion by 2012 and $3 trillion by 2020. Such a rate of growth would make carbon the second largest commodity market, following oil; the financial markets have already responded with products to seize the opportunity for investment in carbon markets, a central feature of a low carbon economy.

In his essay entitled "Measuring Carbon Intensity and Risk," Simon Thomas, CEO of Trucost, describes how Trucost performs investment portfolio analysis by through data on the GHG emissions from both companies and their first tier of suppliers. Its quantitative analyses have been used by asset managers to create carbon-optimized portfolios. Thomas concludes his essay by observing that "resource constraint signals a mega trend towards a low carbon economy."

Further essays in Part II describe ways in which the performance of environmental technology companies can be measured, as well as current investment approaches and products for investors in clean technology, including exchange-traded funds (ETFs).

Entitled "Regulation, Incentives, Investor and Company Case Studies," the final section of the book discusses the evolution of government regulation in terms of the dynamic relationship between policy and investment growth. In her essay entitled "Where Regulation is a Risk and an Opportunity," Kirsty Hamilton of Chatham House concludes, "The renewable energy sector alone and the development of its supply chain can help catalyze new employment, industrial and infrastructure policies that are also essential to tackle climate change." Another essay describes some of the incentives that have evolved to spurt investment in clean technologies.

Rory Sullivan and Jennifer Kozak of Insight Investment emphasize the importance of investment research in their essay, entitled "Investor Case StudiesóClimate Change: Just One More Investment Issue?" They conclude by observing, "Investors have an important contribution to make in the creation of a low carbon economy. Enhanced analysis is one strand of this contribution but so too are company engagement, collaboration with other investors and, perhaps most importantly, public policy engagement."

Throughout this important collection, the contributors address their analyses to active investors, and not to the general public. Such an approach prevents the range of topics addressed by the contributors from becoming overly generalized. Not only investors, but any reader interested in the economic implications of climate change, will derive benefit from reading this book.

In his concluding remarks, Oulton states in the simplest of terms, "All prudent investors, seeking long-term sustainable growth, should allocate a proportion of their assets into environmental markets." By providing up-to-date and in-depth information on issues ranging from global warming to retail investing, "Investment Opportunities for a Low Carbon World" is as authoritative a guide to investing in clean technologies as we have today.


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