Southern’s business practices–namely its operation of coal-fired power plants–are frequently pilloried by many in the media and environmental advocacy community. But the company states it’s been able to avoid building 3,000 megawatts of new peaking capacity since the 1990s with its demand side and energy efficiency programs. And Ratcliffe pledged to invest another USD1 billion in such areas by 2020.

Southern’s plants, of course, are collectively some of the world’s largest emitters of carbon dioxide (CO₂), which is blamed for global warming. And with the incoming Obama administration set to introduce CO₂ regulation in the next couple of months, it faces a challenge to reduce those emissions.

The “greening” of Southern, however, is a clear sign of how much the political environment has changed, and how companies of all stripes are adapting to it. Unlike most industries, regulated power utilities such as Southern enjoy a major advantage in meeting their remediation goals. They can raise customer rates to pay for needed construction and technology. And state and federal regulators are in full support.

As for Washington, President-elect Obama has pledged to ramp up the federal dollars for a wide range of “green” initiatives, each of which will enrich well-run businesses positioned to capitalize. One is the construction of a high-voltage “interstate highway” to bring wind and solar power from prime generating areas to major markets.

Mandates for regulated utilities to use more renewable energy is another policy that should keep industries like wind power growing in 2009 after a record year in 2008. That should be a big plus for the leading companies in that industry, one of which is New World 3.0 Portfolio member AES Corp (NYSE: AES).

As I pointed out in a Dec. 31 Viewpoints column, however, even green companies face a challenge from the weakening economy. Hybrid car sales basically fell in half in both November and December, due to a combination of economic weakness and a halving of gasoline prices.

The big players like Toyota (NYSE: TM) and Honda (NYSE: HMC) are still in the game, as a bet that low gas prices won’t be with us for long. But smaller players simply can’t wait that long to be profitable. And the same dynamic holds for a wide range of industries: limitless potential for the technology, but limited players.

Here in early 2009, the New World 3.0 Portfolio approach continues to beat the overall market by a wide margin. That’s in large part due to careful stock selection, namely focusing on companies backed by businesses that are making it under these very difficult macro conditions. But it’s also because the macro environment is so tough on the average stock, even the blue chips in the S&P 500.

Looking ahead, the upcoming USD1 trillion in fiscal stimulus from Washington, coupled with a very loose monetary policy, will be a big positive for the economy. In fact, though unemployment is rising sharply and industrial production is falling rapidly, market history shows this kind of action does produce results eventually.

The two concerns are how long it will take to have an impact and what kind of side effects will result, i.e. more inflation and a falling US dollar. And we won’t have the answers to those questions for some months to come.

What we do know is that well-run companies that continue to post solid earnings will continue to outperform as long as this downturn lasts. They will lead whatever recovery we see in the overall market. And in the meantime, great companies are as cheap as they’ve ever been and ripe for the picking.

The volatility in the markets we’ve seen in recent months won’t go away all at once. And even the best-run companies could face further stock market downside, particularly if the global economy really heads into reverse. Quality, however, eventually wins out. And there’s no better place to shop for it than among cheap stocks of companies that are best positioned to take advantage of the world’s transition to the kind of new processes and new technologies that will reshape the world of the 21st century.