State Treasurer Robert P. Casey, Jr. this week announced a new investment strategy for the Commonwealth that will promote greater public and private investments in clean technologies, such as alternative and renewable energy sources, and provide superior returns for taxpayers.

Casey said his new Keystone Green Investment Strategy is one of the nation’s most comprehensive among institutional investors and the result of a yearlong series of meetings with private sector investors, financial experts, non-profit state energy funds and others.

Highlights include:

1. The Keystone Green Fund – a new investment fund Casey is establishing to attract and leverage private sector investments in clean technology products and firms that will benefit Pennsylvania’s economy. The Fund will include up to $40 million in Treasury assets and several million more from Pennsylvania-based energy funds.

2. Active Equity Management – Casey will reallocate up to $50 million in Treasury assets from existing investment managers to those who can demonstrate a track record of providing superior returns on their investments in clean technology stocks.

3. Environmental Equity Screens – Treasury will develop new investment screens for its investment managers and outside consultants to use when evaluating a company’s potential exposure to environmental liabilities.

4. Investor Network for Climate Risk – Pennsylvania will formally join the INCR, a network of institutional investors and financial institutions that promotes better understanding of the financial risks and investment opportunities posed by climate change.

“Keystone Green is a comprehensive effort to identify investments that can generate superior returns for Pennsylvania taxpayers, while attracting future private sector venture capital investment and job growth in clean technology industries,” Casey said.

Brian Hill, President of the Pennsylvania Environmental Council, lauded Treasurer Casey’s action, saying, “this new investment strategy by the Treasurer links environmental protection and economic development, and puts Pennsylvania at the forefront of a national trend to promote sustainable economic development. It is both progressive and prudent.”

Venture capitalists invested $1.6 billion in North American clean technology companies in 2005 – 43 percent more than the previous year – according to a May 2006 report from Cleantech Capital Group, LLC.

Cleantech’s report emphasized that, “…the seeds are being laid now to determine which state’s companies will get the lion’s share of investment, and which states will call the leaders of the cleantech industry their own. The states that can best woo entrepreneurs and investors now will have a chance to create self-perpetuating cleantech clusters that drive dynamic economic growth while also improving the economy…”

Rob Sanders, managing director of The Reinvestment Fund (TRF) of Philadelphia, said, “TRF commends the Pennsylvania Treasury Department for its vision and leadership in creating the Keystone Green Fund. TRF believes the new Fund will be an engine for creating quality Pennsylvania jobs in the clean technology sector, for helping Pennsylvania citizens and businesses reduce their energy costs, and for cleaning Pennsylvania’s air, water and soil – all while paying a profitable return to the Fund’s investors.”

Kevin Murphy, president of the Berks County Community Foundation, said, “We commend the Pennsylvania Treasury Department for its farsighted decision to invest in Pennsylvania’s rapidly emerging clean technology sector. Encouraging private investment now in environmentally friendly power will be a competitive advantage to the Commonwealth as it seeks to attract and retain jobs in the future. Pennsylvania’s leadership position, bolstered by the Treasury’s action, will strengthen her position in the global economy.”

Venture capital experts say that clean technology is the fastest-growing sector in the private funding business. Earlier this year, the New York Times reported, “Public and private investment money and venture capitalists are marshalling billions of dollars to pour into companies pursuing alternative energy – renewables like wind or solar power – or clean technologies, like pollution-control innovations that make conventional energy sources cleaner.” (Felicity Barringer, May 17, 2006)

Joyce M. Ferris, managing partner, Blue Hill Partners, LLC, said, “By creating the Keystone Green Fund the Treasury Department is leading the way in generating strong financial returns for the citizens of Pennsylvania by investing in this important asset class. In addition to achieving competitive, risk-adjusted returns in this profitable investment area, the Fund should also generate measurable environmental returns and supporting economic development…and provide important fuel to support the growth of green technology companies in Pennsylvania.”

Casey’s goal for the $40 million Keystone Green Fund is to achieve solid returns on clean technology investments while enhancing the Commonwealth’s economy. Treasury will invest up to $15 million in innovative and profitable clean technology businesses that have a direct nexus to existing or nascent Pennsylvania firms, and up to another $25 million in other clean technology opportunities that offer attractive returns, as well as broad benefits to the state’s economy.

Three of Pennsylvania’s four sustainable energy funds – TRF’s Sustainable Development Fund, West Penn Power Sustainable Energy Fund, and First Energy’s Sustainable Energy Fund – have formally expressed their interest in co-investing with Treasury in the Keystone Green Fund. This marks the first time that the sustainable energy funds have pooled their resources in the interest of alternative energy and economic development.

New $50 Million Treasury Investment in Profitable Clean Technology Stocks. Casey said the Pennsylvania Treasury Department will take specific steps to make certain that up to $50 million of its public equity holdings can take advantage of the potential opportunities that clean technology industries offer in the new marketplace. At the same time, Casey said Treasury will adopt a series of written guidelines or “investment screens” for all of its public equity investment managers to consult in assessing companies’ potential risks of loss from climate change, as well as changes in international energy economics and carbon regulation.

Casey also announced the Pennsylvania Treasury Department has formalized its relationship with the Investor Network on Climate Risk (INCR) by joining the three-year-old organization. INCR is a network of institutional investors and financial institutions dedicated to promoting better understanding of the financial risks and investment opportunities posed by climate change.

Founded by state and city treasurers and comptrollers, labor pension fund leaders and foundation leaders in 2003, INCR represents over 50 institutions that collectively manage more than $3 trillion in assets. INCR believes that prudence, common sense and fiduciary responsibility should compel most institutional investors to examine the financial ramifications of climate risk and, where appropriate, to invest based upon those risks and opportunities.

“Treasurer Casey is demonstrating prudent, smart leadership by joining forces with dozens of other investors to better understand the financial risks and investment opportunities from climate change,” said Mindy S. Lubber, president of Ceres and director of the Investor Network on Climate Risk. “Whether from extreme weather events, regulatory changes or growing demand for renewable energy, climate change is a serious business issue that will have far-reaching consequences for businesses and investors in the years ahead.”

Casey said the Treasury Department will work with INCR to insure that investors can obtain greater access to information about how climate change will impact the long-term viability of individual businesses and industries.

A copy of the Keystone Green Investment Strategy is available online.

9/15/2006