Green stocks in both renewable energy and consumer products have not been immune from the current economic freefall. Solar companies have been especially hard-hit because sales of solar panels are largely dependent on financing and the recent decreasing price of oil has made investment in them less attractive in the short term, according to a press release from

Prospects for cap and trade legislation that would require companies needing to increase their emissions to buy credits from those that pollute less faces uncertainty.

Still, investment managers committed to green funds see opportunities for long-term growth in green stocks, and contend that many companies in the green sectors are performing better than their falling stock prices might indicate.

"These companies continue to offer bona fide solutions to critical problems that have not gone away, and over time the disconnect between their performance and stock prices will realign," said Jack Robinson, President and CIO of Winslow Management, an investment advisory firm that has been a pioneer in green investing for 25 years.

Calling October 3, 2008 "a defining moment for renewable energy in the United States," a just-published evaluation by Winslow Management finds that the Energy Improvement and Extension Act of 2008 included in the Economic Stability Act represents "a big, bold new tax incentive plan that will stimulate the installation of renewable-energy products and systems across America. Winslow believes that this Act will generate thousands of new green jobs and help rekindle economic growth."

"The extension of production tax credits to the solar industry for eight years is a game-changer," Robinson said. "With the financial aspect progressing toward solution, concerns over financing for renewable energy should ease."

The Act extends production tax credits for wind energy for one year, and for the first time includes tax credits—for two years—for geothermal.

Carey Callaghan, CIO of American Trust Energy Alternatives Fund, agrees that the Energy Improvement and Extension Act is a major development for the renewable energy industry.

"To develop renewable energy as an alternative to fossil fuels, in effect we replace fuel with significant upfront capital costs. With investment reduced and capital availability down significantly from a year ago, alternative energy continues to face a headwind. But with long-term production tax credits in place, we are looking for explosive growth in the industry."

Professionals at the consulting firm Ernst & Young seem to concur with the optimistic forecast outlined by Robinson and Callaghan. In a recent report on venture capital investment in cleantech, the firm found that such investments have increased from 1.6% of total investment in 2003 to 11% in 2008. Global venture capital investment in cleantech in 2008 is expected to significantly exceed the record $3 billion invested in 2008.

According to Gil Forer, Global Director, Cleantech, IPO and Venture Capital Initiatives at Ernst & Young, "Cleantech is here to stay.

"Cleantech has passed an important investment tipping point. Demand for cleantech solutions is increasing due to higher energy and resource costs, regulatory requirements and the desire for corporations to pursue climate change related market opportunities."

The report found an overwhelming majority of corporations are undertaking climate change initiatives. Many plan to significantly increase investment in cleantech by their corporate venture capital programs during the next few years.

If, as Robinson of Winslow observed, the "financial aspect (is) progressing toward solution," it will have occurred because investor confidence in the market has been restored. As governments shore up the global economy with large infusions of capital, it is expected that investor confidence will follow. Expanded government commitment in renewable energy, as evidenced in the US by the Energy Improvement and Extension Act, should encourage investors.

"The US has shifted into a chronic state of action on energy," said Jason Grumet, executive director of the National Commission on Energy Policy. If the trend accelerates as expected in coming months, investors in renewable energy and related green technologies can expect to reap steady rewards for their commitment to energy independence.