A growing number of companies are recognizing that the market for clean energy has a bright future: strong returns on renewable-energy stocks, increased awareness of climate change, and the high price of oil suggest that those who get involved in alternative energy will be well positioned to reap early profits.

A 2007 survey conducted by PriceWaterhouseCoopers shows that, of the 150 businesses questioned in the United Kingdom, 71 percent stated that their corporate behavior was influenced by concerns such as “meeting customer expectations, maintaining competitive advantage and making cost savings," all stemming from climate change-related anxieties. The degree to which these anxieties have been translated into actual action, however, has varied.

There is a general belief that short-term profitability is not associated with investments in clean energy, which often require large amounts of capital. For this reason, many businesses are hesitant to adopt such energy-saving measures, or to bank big money on developing technology that is not guaranteed to be lucrative in the future. Why pay $0.05 to $0.08 for a kilowatt of wind-generated electricity when you can buy coal-generated electricity for even cheaper? Also, heavy investment in budding clean technologies can be undercut by a plummet in oil prices. However, as corporations such as Wal-Mart, Google, and Bank of America have shown, this ideology is no longer as easily accepted as it once was.

Google and Wal-Mart have recently taken steps to adopt solar energy, while Bank of America has begun construction on its futuristic 1,200-foot Manhattan tower, which will be powered partly by wind energy, and will recycle all of its water and manufacture ice at night to cool the building down during the day. Consumers and executives alike have begun to gain awareness about the reasons behind, and consequences of, climate change. But perhaps a bigger motivation is the growing realization that renewable energy has a promising—and profitable—future.

Mutual funds specializing in alternative energy, such as Guinness Atkinson Renewable Energy Fund and New Alternatives Fund, have shown unexpectedly strong returns. The latter, in fact, has outperformed the S&P 500 in 2007 by about 16 percent. According to the New York Times, Edward Guinness, one of the Guinness Atkinson fund’s co-managers, estimates that approximately 85 percent of the companies in his portfolio will show healthy profits by the end of 2007. Further, he sees solar power as holding the most promise in the future, with a possible 30 to 40 percent increase in annual sales. With consumers responding to high gas prices, and companies’ increased fears of appearing “un-green", the remarkable success of these companies shows that businesses can indeed make a tidy profit by not only investing in renewable-energy mutual funds, but also by sourcing electricity from renewable-energy companies.

Of course, not all big companies are rallying to overhaul the way they purchase and use electricity. In an April 2007 survey conducted by KPMG, a large European accounting firm, 73 executives from the FTSE 350 (Financial Times Stock Exchange 350) and equivalent private companies were interviewed on how they were responding to the issue of global warming. Eighty-six percent of the executives questioned admitted that they lacked a solid strategy on dealing with climate change; out of a list of corporate concerns, climate change held the lowest priority for the survey’s respondents. Still, a sound three-quarters conceded that “businesses and individuals" must invest immediately to tackle the problem. In spite of the low priority ascribed to climate change, 84 percent of businesses believed that improved awareness between companies concerning the issue was integral to fighting it.

The conflicting sentiments that the KPMG survey reveals suggest the existence of something of a first-mover problem. Without a clear picture of what the emissions regulatory environment will resemble in the future—in the U.S., for example, there is no regulatory framework in place and it remains uncertain what the future will hold—a company has little to gain from changing its practices to reduce its emissions. Installing solar panels is still more expensive than buying power off the grid, after all. Even if executives truly do believe that climate change is a serious issue in need of corporate action, only a minority will have the financial leeway—and gumption—to jump into the lurch on their own. Governments, then, can play a facilitating role by clarifying what regulations will be like in the future—by establishing the rules of the game, governments can ensure that all players make the move.

Advocates of funds dedicated to alternative energy, citing an Opinion Research Corporation survey, suggest that this surge in interest and investment is due to increased awareness of the impact that global warming will have on the future world, as three-quarters of investors believe that climate change will lead to massive changes during their lifetimes and during those of their children.

Possibly the most surprising statistic from the PWC study is that nearly half of all the businesses surveyed agree that current government policies fail to encourage behavioral change and need to provide improved clarity so that businesses may formulate effective investment strategies. In fact, most businesses regard streamlined, improved governmental regulation as the most effective tool to achieving carbon neutrality, and a compelling two-thirds of companies even welcome the use of the tax system to push them towards better carbon efficiency. Still, European companies and American companies differ slightly in their views on taxation.

If those figures seem unexpected, in an April 2007 Washington Post/ABC News/Stanford University survey of 1,002 Americans, 70 percent believed that the government ought to be doing more to combat the effects of climate change. Without a clear policy towards climate change, even the most well designed strategy to combat it may be untenable.