Wealth Matters: 3 Ways to Create a Climate Change Investment Strategy

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Kevin Walenta, who manages Fidelity’s select environment and alternative energy portfolio, said he followed companies that saved energy in more traditional ways. These companies, like Ingersoll Rand, Lennox International, Honeywell and Johnson Controls, install efficient lighting or heating and cooling systems in commercial buildings. The result is significantly less energy consumption, higher green ratings for a building and returns in just two or three years.

Mr. Walenta said he looked at both parts of investing, the environmental impact and the total return.

“I am looking for the companies that are driving environmental change but have a durable business model, good returns, positive cash flow and strong balance sheets,” he said. “Within the context of environmental change, I want them to drive profits over long periods of time.”

Another area for investors is electrical utilities, he said. In regions like Southern California and Arizona, the cost of solar energy makes it competitive with traditional energy. The same, he said, holds true for wind power in parts of the Midwest like Oklahoma.

“A decade ago, they weren’t the best investments because you had significant premium for a wind turbine or a solar panel relative to the other options, like natural gas and coal,” Mr. Walenta said. “Today, that difference is nonexistent.”

Such strategies aim to rebut the common belief that investing with an environmental focus reduces returns. There are examples of inferior investments made to achieve a social good, but there are companies focused on green initiatives that are profitable and may be more so as climate change intensifies.

“There are three main misperceptions that I talk to every investor about: You give up performance to be responsible investors, responsible investing isn’t mainstream, and you can’t make an impact in public market securities,” Mr. Liberatore said.

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