Some 97 green hedge funds are actively operating, and more are expected to enter the fray as economic conditions improve. Green hedge fund operators, including representatives from Brennan Investment Partners, CE2 Environment Fund and the New Energy Fund, will close out the conference today with a discussion of how they execute their strategies.
The event also features venture capital and private equity players who say activity is picking up again. One venture capital manager, ironically, compared the momentum to the start of the infamous dot-com push, noting that virtually all funds now take it for granted they need exposure to renewable energy and cleantech – regardless of how good the returns are.
"There are bucks to be made," said Neal Dikeman, a founding partner of Jane Capital. "Huge playground."
Larger Wall Street institutions had been pushing into the sector in 2007 and 2008 before the financial crash. Having pulled back sharply after Bear Stearns and Lehman Brothers Holdings collapsed, many now seem to be inching back, although the banks are still focused on shoring up their shaky balance sheets.
Morgan Stanley recently announced the formation of an Environment and Social Finance Group, putting industry veteran Audrey Choi in charge. Most other financial institutions, including Merrill Lynch, Barclays Capital and JPMorgan Chase, have also established environmental finance and carbon trading desks recently.
Capital is also seeking out not only younger cleantech startups but also older, larger corporations able to show investors they are focused on environmental stewardship, especially with regard to climate change.
Last month, Standard & Poor's launched a new stock market index designed to track the performance of "low carbon companies." The index includes most of the S&P's current benchmark companies, with 400 companies from the S&P 500 that "are deemed to emit few greenhouse gases relative to annual revenue," the company said in a release.
New "green" financial products also continue to emerge. Most are designed for sophisticated investors, but there are new offerings geared toward Main Street. These include a new green homeowners insurance policy just launched in New York by Fireman's Fund. Many banks here are also offering green car loans for hybrid vehicles and even home equity loans to help finance energy-efficiency retrofits.
For some time, institutional investors have been able to put money into carbon emission futures and options contracts, mostly tied to the European Union's Emission Trading Scheme and most recently the Regional Greenhouse Gas Initiative (RGGI) in the eastern United States.
But just before the economic crash, big banks had begun marketing carbon index funds for retail investors. Experts see the congressional moves toward cap and trade reviving this trend.
'I can see nirvana coming'
Indeed, the anticipation of a larger, federally regulated carbon market is the biggest driver behind the growing popularity of green finance, and experts say emissions trading and climate change-related investments stand the best chance of reviving Wall Street's fortunes.
Behind the scenes, much of the rebranding of the city into the nation's green finance capital is being pushed by the New York City Economic Development Corp.
One emissions trading analyst confirmed that corporation officials are actively seeking experts for advice on how best to ensure that New York's financial community can position itself ahead of the pack. The advice they are giving is to stake a big claim in the expanding U.S. carbon market, now largely dominated by the voluntary Chicago Climate Exchange.
New York has already missed out on the chance of becoming the center of market activity surrounding the Regional Greenhouse Gas Initiative, the nascent cap-and-trade program involving 10 Northeastern states and currently the nation's only mandated carbon emissions trading scheme.