Forbes Recommends Clean Energy Stocks

Renewable energy stocks take a battering, but Forbes.com still recommends them for long-term portfolios and we outline why we think there will be a big green boom once this downturn is over.

The Carbon Principles

Leading Banks Coming Green With “The Carbon Principles”

Citi, JPMorgan Chase and Morgan Stanley yesterday released “The Carbon Principles”, a set of ” guidelines to strengthen environmental and economic risk management in the financing and construction of electricity generation.”

The principles were developed in consultation with power companies American Electric Power, CMS Energy, DTE Energy, NRG Energy, PSEG, Sempra and Southern Company, as well as the NGOs Environmental Defense and the Natural Resources Defense Council (NRDC). Although I must admit I’m not very familiar with the latter two, they both seem like fairly solid environmental agencies. (Check out the detailed global warming myth-buster page, Global Warming by the Numbers page and Global Warming: A Review of the Facts on Environmental Defense’s website, and NRDC’s damning report on the Bush administrations latest earth-destroying budget.)

The upshot of The Carbon Principles seems to be that the big banks will discourage investment in power-generation enterprises that fail to take into account CO2 emissions over the long term through the “Enhanced Diligence Process”, developed in conjunction with Matthew Arnold of Sustainable Finance. The reasoning behind the banks decision to create these principles is to assist in “reducing the banks regulatory and financial risks associated with greenhouse gas emissions.”

The principles state the banks “will encourage clients to invest in cost-effective renewables and distributed technologies, taking into consideration the value of avoided CO2 emissions.” Presumably the banks see further CO2 restrictions coming up in the States too, whether the Democrats or the Republicans win the next election. That is a good sign, although the part about viable power sources including coal and nuclear (“This may include power from natural gas, coal and nuclear technologies.”) is not very confidence-inspiring.

Green Investing or more GreenWashing?

Here are the principles as given in Citi’s press release:

Energy efficiency. An effective way to limit CO₂ emissions is to not produce them. The signatory financial institutions will encourage clients to invest in cost-effective demand reduction, taking into consideration the value of avoided CO₂ emissions. We will also encourage regulatory and legislative changes that increase efficiency in electricity consumption including the removal of barriers to investment in cost-effective demand reduction. The institutions will consider demand reduction caused by increased energy efficiency (or other means) as part of the Enhanced Diligence Process and assess its impact on proposed financings of certain new fossil fuel generation.

Renewable and low carbon distributed energy technologies. Renewable energy and low carbon distributed energy technologies hold considerable promise for meeting the electricity needs of the US while also leveraging American technology and creating jobs. We will encourage clients to invest in cost-effective renewables and distributed technologies, taking into consideration the value of avoided CO₂ emissions. We will also encourage legislative and regulatory changes that remove barriers to, and promote such investments (including related investments in infrastructure and equipment needed to support the connection of renewable sources to the system). We will consider production increases from renewable and low carbon generation as part of the Enhanced Diligence process and assess their impact on proposed financings of certain new fossil fuel generation.

Conventional and advanced generation. In addition to cost effective energy efficiency, renewables and low carbon distributed generation, investments in conventional or advanced generating facilities will be needed to supply reliable electric power to the US market. This may include power from natural gas, coal and nuclear technologies. Due to evolving climate policy, investing in CO₂-emitting fossil fuel generation entails uncertain financial, regulatory and certain environmental liability risks. It is the purpose of the Enhanced Diligence process to assess and reflect these risks in the financing considerations for certain fossil fuel generation. We will encourage regulatory and legislative changes that facilitate carbon capture and storage (CCS) to further reduce CO₂ emissions from the electric sector.