U.S. Climate Change Policy Will Drive Significant Investment Opportunities in Traditional and Alternative Energy

MFA Reporter

March 2008

By Ben McMakin and Janet Anderson

A new President and the likelihood of more Democrats in the House and Senate may tip the balance of power in energy debates from traditional oil and gas interests to proponents of new energy sources and cleantech goods and services. While we watch the election unfold, and as the rhetorical battles over energy policy continue in Washington, D.C., climate change legislation looms largest of all the energy debates.

As the United States gradually changes the complexion of its energy supply mix towards alternative and renewable sources and implements practices aimed at reducing overall energy demand, a number of sizeable investment opportunities currently exist for asset managers. More will arise in the future. This trend is partly market-based, as companies like GE, Wal-Mart and BP have demonstrated in response to demand from individual and commercial customers (and institutional investors).

However, market developments can carry the trend only so far. U.S. federal (and state) policies are a powerful force in nurturing markets and providing economic incentives for progress in this area. The largest driver of these opportunities over the next few years will be U.S. climate change policy. Given the scope of the climate issue, traditional and alternative energy companies – as well as many companies that have not historically thought of themselves as energy companies or concerned themselves with energy policy matters – are paying close attention. Alternative asset managers should too.

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Reprinted with permission from the Managed Funds Association.