Many of the top picks among the adaptation plays are cheaper than mitigation stocks. Ormat Technologies, a leader in renewable geothermal energy, has a pricey p-e ratio of 41, based on 2008 earnings. But in the less glamorous automobile sector, makers of mileage-boosting technologies may outsell competitors more reliant on gas guzzlers.
By this logic, France's PSA Peugeot Citroën, which builds Europe's most fuel-thrifty fleet, stands to beat out U.S. rivals as global demand for eco-vehicles rises. Its p-e is just 9.
An upside to these broad climate-change funds is that they expose investors to plays of all sizes, in both developed and emerging markets. But tracking such a diverse portfolio requires unusually broad expertise in complex energy, technology, and cross-border markets, noted Angus McCrone, chief editor at New Energy Finance, which tracks green markets.
Regulatory reversals can also dent returns. As U.S. lawmakers debated the recent energy bill this fall, renewable stocks were whipsawed on each rumor that beneficial tax credits would disappear or expand.
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