Denver energy investors' outlook
They see a place for traditional and alternative energy
Although the adage is that money makes the world go around, the same could be said for energy. At least that’s according to recent findings from the Morgan Stanley Investor Pulse Poll of approximately 300 affluent Denver area investors ages 25 to 75 with $100,000 or more in investable household financial assets.
The government and private entities regularly report on the current cost of and anticipated changes in the price of oil, natural gas and electricity. And with increasing efforts to generate interest (and profits) from solar and wind power, it follows that the energy sector is ranked second among 18 sectors for being a good investment prospect for 2015. Additionally, investing in clean energy is one of the issues that affluent investors anticipate taking action on in the next three years.
Focusing specifically on the prospects for various types of Energy investments in 2015, the top three (of 10) are a mix of traditional and alternative energies: natural gas, petroleum-based such as oil and gasoline, and solar. At least four in 10 have a positive outlook toward wind, battery-powered electic vehicles, and geothermal. At the bottom of the list are nuclear energy and coal; more say these are bad investments than good ones.
Compared with national sentiments, more Denver high net worth investors view the investment prospects of petroleum-based energy products as good for 2015 (67 percent vs. 53 percent). Conversely, they are less positive toward the prospects of solar (53 percent vs. 61 percent nationally) and geothermal (42 percent vs. 51 percent).
On average, investors estimate that 17 percent of their portfolio is currently allocated toward the energy sector
Considerations and Interest in Investing in Energy Sources
Performance and policy factors affect the approach Denver affluent investors take to energy investments. Their top consideration is the “bottom line”, followed by past history or track record of success and growth, diversification and energy independence.
Two in three report that environmental impact is a factor, and about six in 10 agree that they consider government regulations and liquidity.
Rounding out the list of considerations are government incentives, social impact and carbon footprint.
Although it ranked seventh of 11 issues, 71 percent of Denver affluent investors report that clean energy is an issue of personal importance. And as solar, wind and geothermal are each seen as good investment prospects in 2015, it makes sense that 65 percent express interest in investing in clean energy sources.
Yet converting investment considerations and personal interest into action may prove difficult. When probed on the possibility of investing in home installation of a sustainable energy system, only “smart” home products designed to save energy, such as next-generation thermostats or Energy Star-rated appliances, are cited by about half of this region’s affluent investors. For clean energy systems themselves, that typically require significant financial outlays or advanced planning, investment plans for the next year drop to 15 percent for solar panels, 10 percent for wind power and 8 percent for a geothermal system.
Energy Knowledge and Options: National and Personal
Denver high net worth investors’ behavior and outlook on the Energy sector are informed by high awareness of energy issues. Most affluent investors self-report that they have at least some knowledge of U.S. energy issues and problems; 30 percent say that they have a lot of knowledge of this topic.
Turning to U.S. policy to address the nation’s energy challenges, fully 86 percent agree or that the U.S. should invest in technology and programs designed to increase energy efficiency. When asked for the preference, 43 percent of affluent investors favor expanding production of alternative energies (wind, solar and biomass) for this purpose, while 37 percent prefer to expand production of traditional energies such as oil, gas and coal.
Nationally, by contrast, more than in Denver (58 percent) favor expanding alternative energies, while fewer opt for expanding traditional energies (29 percent).
Opinion of Recent Energy Issues
Among the many energy topics that have faced policymakers—and Denver affluent investors—over the last few years, four take center stage in this survey. In line with their similar preferences for traditional and alternative methods for expanding energy production, support is roughly equal for the solutions that focus on alternative energies as for those that focus on traditional energies.
Fully three in four Denver affluent investors support the expansion of wind farms and 71 percent support the expansion of solar farms. At the same time, 73 percent support hydraulic fracturing (fracking) of shale deposits to develop oil and gas resources and 69 percent support efforts to develop the Keystone Oil Pipeline System between the U.S. and Canada.
Compared with affluent investors nationwide, those in Denver are more supportive of fracking (73 percent vs. 53 percent) and are less supportive of expanding solar farms (71 percent vs. 80 percent). When asked whether they support hydraulic fracturing to develop oil and natural gas resources, 37 percent responded as favorable in San Francisco, 47 percent in Los Angeles, 46 percent in Boston, 43 percent in Chicago, 48 percent in New York City, 64 percent in Atlanta, and 71 percent in Houston.
For many affluent Denver investors, climate change is real. More than half say that climate change is having at least some impact on planet Earth, with 34 percent reporting that climate change is having a lot of impact. More than half of investors place the blame on human activity: 60 percent say that humans are having at least some impact on climate change. This is significantly lower than the proportion of high net worth investors nationwide who say that humans are affecting climate change (71 percent).
Despite a general sense that climate change is impacting the planet, markedly fewer Denver-region investors (30 percent) report that climate change is affecting the value of their investments/portfolio.
Note: Total may not sum to 100 percent as those saying "don't know" are not shown.
The Morgan Stanley Investor Pulse Poll was conducted via telephone interviews from Oct. 14 through Dec. 2, 2014, by GfK Public Affairs & Corporate Communications. A total of 303 respondents in the greater Chicago market were interviewed using a listed sample of landline phone numbers pre-identified as high net worth households ($100,000 or more in liquid investable assets). Respondents were required to be between the ages of 25 and 75 years old and to be one of the primary decision makers in the household for financial matters. Quotas were applied in order to obtain approximately one-third in each of the following categories: $100,000 to $499,000; $500,000 to $999,000; and $1 million or more in investable assets. Results were then weighted to age within each of these three asset classes using the Federal Government’s Survey of Consumer Finances data. The margin of error on the total sample is +/-5.6 percentage points on the total; the margin of error among subgroups is higher.