Alternative Energy Stocks and Risk Mitigation

Good investing strategies are dependent on proper risk assessment. Climate change constitutes a significant economic risk.Alternative energy stocks are part of wider market trends. The Dow hitting an all time high of 15,000 in May bodes well for alternative energy stocks in the second half of 2013. The strong stock performance at the beginning of the year is also a good predictor of stock performance for the rest of the year (historically, the performance of the stock market in January is a good predictor of the market for the year).

Although there are some contradictory reports, overall an increasing number of investors are integrating climate change into their risk assessments.

As reported in the Guardian, a 2012 memo from several major investment networks responsible for more than $22.5 trillion in assets said, “Further delay in implementing adequately ambitious climate and clean energy policy will increase investment risk for institutional investors and jeopardize the investments and retirement savings of millions of citizens.”

Contrary to the general trend, the Asset Owners Disclosure Project (AODP), released a report at the end of 2012 that showed how the world’s biggest investors are not doing a great job managing climate risk.

According to a report conducted by Mercer, “The vast majority of investors now consider climate change a material investment risk or opportunity and incorporate climate change risk assessments into their existing investments.”

The combination of low interest rates and strong corporate balance sheets will drive stocks in 2013, including alternative energy. As the first half of the year comes to a close, there is good reason to believe that the second half will be good for alternative energy investors. In 2013 and beyond growing investor awareness will be a salient factor that will grow alternative energy stock valuations.

© 2013, Richard Matthews. All rights reserved.

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