Environment-linked funds have metamorphosed from niche product to full-blown fad. And experts say there are good reasons for that. Green is, quite literally, the new colour of money.
The increasing prominence of the climate change debate has pushed investment products with environment or sustainability-related themes, all but invisible just a few years ago, into the limelight. Companies active in sectors such as renewable energy and water treatment now find themselves courted by a host of financial institutions and their customers - especially in Asia.
About two years ago, the Dutch bank ABN Amro was one of the first to recognise sustainability as a 'mega investment trend for clients', according to head of equity research for Asia, Roger Groebli, and launched a fund tied to firms in the water industry. While it was well received in Europe and the Middle East, in Asia ABN Amro wasn't even able to recoup its marketing costs.
'The fund did not pay off because the awareness among clients and the industry was simply not there,' said Mr Groebli. 'It was an investment theme ahead of its time.'
Fast-forward 24 months and it's a very different story. According to Mr Groebli recent offerings tapping into water and alternative energies such as ethanol and solar 'have been doing extremely well'.
Ananth Shenoy, managing director and head of managed investments for Citi Global Wealth Management Asia Pacific, believes Asian investors have concentrated more on sustainability issues 'given the wide-ranging ramifications of climate change on the environment and the global economy'.
'As public anxiety escalates, investors are more aware of this recurring theme, and they're seeking opportunities created [by] governments, regulators, corporations and individuals reacting to the perceived climate change threat,' he said.