Green technology stocks are an area of the stock market that should be of interest to all investors, not just those that have strong concerns about the state of the environment. Although environmental concerns have become mainstream rather than lunatic fringe, "Green" still has the "crazy tree-hugger" connotation for many, so Green technology is often called Clean technology instead. It is a term used for technology that operates in an environmentally friendly manner or is involved in the restoration of environmental damage, usually that caused by human activity.
The Bush Administration has gone from doubting the scientific validity of global warming to acknowledging its reality and is now showing a commitment towards technological change to mitigate the impacts. In her address to the Major Economies' Meeting on Energy Security and Climate Change in 2007, Condoleezza Rice compared the significance of global warming with that of international terrorism. That she stressed the need for the "development and deployment of new clean energy technology" is particularly noteworthy for stock market investors.
The May 1st 2007 "Cleantech Report" from Lux Research is a comprehensive document explaining the fields of clean technology and giving company profiles on numerous companies engaged in these areas of business. The report states that at the time of publication there were 930 companies worldwide specializing in the cleantech energy field and suggested that this was too many, likely to lead to a collapse in the market. The subsequent change in attitude of the Bush Administration and the seemingly relentless rise in oil prices make this far less likely now, thus greatly enhancing investment potential in this area.
So what are essential areas to consider when selecting clean technology companies to invest in? In this rapidly evolving arena, the following should be considered:
1. Research and development is a key component of cleantech energy companies. Patents held and particularly how they have affected the company's economic performance are of primary significance.
2. Regional competition for market share where companies are heavily involved in the production and/or marketing of their products.
3. Local, State and Federal/National government attitudes and legislation impacting on clean technology. Companies based in locations with strong governmental support are a more viable proposition, although such commitments are spreading rapidly.
4. The political stability of the country or region the company is located in. Research and development in clean technology is occurring worldwide, many companies worthy of consideration for investment are based outside the US. At the time of the Lux Cleantech Report, the Asia/Pacific region led in R&D and Europe was the leader in IPO.
5. Standard investment considerations should not be ignored, evaluating management performance, industrial and public relations, share price fluctuations and dividends paid is as crucial in deciding on cleantech energy companies to invest in as it is in any other sector of the stock market.
It is also important to recognize that research and development in clean technologies is not only occurring in companies listed in these sectors on the stock market. Many larger companies, such as General Electric, are investing large sums in cleantech R&D. The more cautious investor might prefer to invest their cleantech investment budget in these companies rather than risking it in the generally smaller cleantech companies.