Clean tech attractive despite "bubble" concerns

The widely debated 'green bubble' is building up around selected alternative energy stocks but there are still many attractive opportunities in climate change-related investments, according to Terry Coles, co-manager of the F&C Global Climate Opportunities Fund.

"There is a bubble forming across particular sectors such as the wind power industry but the growth rate in the solar sector, for instance, is still very attractive," he said.

High oil prices have been one of the key drivers for growth in the alternative energy sector and a sharp drop in price could burst any potential bubble. "That would be negative for the alternative energy sector but we have no reason to believe this is likely to happen in the near future. As with any other sector, there will be winners and losers, our responsibility is to identify companies that have a cost advantage and/or technological leadership," Coles added.

A good example of a well positioned company is Chinese solar cell manufacturer, SunTech Power Holdings. The company is developing Building Integrated PhotoVoltaics (BIPV) technology, which Coles believes to be a rapidly growing segment within the solar industry. "This is a highly efficient company with cost leadership, and has been able to secure sufficient silicon supply to facilitate its expansion. We believe it is going to be one of the winners, although recently we have taken some profits following the shares strong performance since purchase and a more challenging valuation," he said. Another attractive stock is Japan's Aisin Seiki, which supplies Toyota and other car manufactures with components such as transmissions and systems for hybrid vehicles, an area of high growth and focus for the auto industry.

"The portfolio of our fund is truly global which enables us to identify pockets of opportunities across different markets," he said. "Alternative energy is just one of the nine investment themes we follow so we have exposure to other very attractive areas related to climate change." These include investments in companies involved in energy efficiency, sustainable mobility, waste, advanced materials, forestry and agriculture, water, acclimatisation and other sectors such as carbon trading.