Saturday, October 23, 2021

Investing in green technology is even more lucrative than stocks and tech

To think you could make money investing in green businesses and technologies—which would then contribute to the fight against climate change—is to think in terms of cosmology and astrophysics. We’ve been here before, but the economics of our situation are much different now.

Green investing has almost caught on the way financial firms thought about the software revolution, and expect it to soon catch on the way futures trading is poised to do.

Young businesspeople aren’t waiting on the green wave to hit. They’re doing it by investing in green businesses already. Whether a competitive advantage or a fluke, they’re investing in a little company whose molecules would generate all the energy necessary to save the world.

The average American investor is still getting used to the fact that financial firms that help choose portfolios can reliably forecast returns and raise money from investors. Green investments are not about knowledgable staff but the stocks of companies whose natural resources are a big part of the goal of cleaning up the environment. Many investors get an edge by buying companies who know the hardest things about investing, making renewable technologies like batteries and solar technology.

In the first few years after the oil crises of the 1970s, alternative energy technologies failed. The companies that had invested in solar panels and other renewable energy technologies were derided as “parasites” that had stifled innovation, as if innovation would not come at all if private investors couldn’t gamble on greener technologies. It wasn’t true.

Today energy efficiency and the refinement of solar photovoltaic and wind power have produced astounding results: no new oil has been discovered in the last 30 years. Green investing has caused many investors to question their assumptions, but sustainable investments have already reached new records of net assets and dividend growth, even in the face of financial market crashes and Fed policy that sowed fears of a looming recession.

Investors didn’t stop thinking about renewable energy technology because the idea scared them. Instead, the technology became a hard-nosed area where stable returns could be had. Several dozen green investing companies trade on major stock exchanges across the country.

Green investing is a hard-core subset of corporate investing. The most popular broad portfolio was built by five companies: Apple, Microsoft, Johnson & Johnson, Coca-Cola and Exxon Mobil. None of them had planned to throw their eggs into the renewable energy basket, and all would have taken serious pains to protect their core business. So they were able to maintain their profits even during the period of greater uncertainty that occurred in the late 1980s and 1990s. What they’ve done is to acquire renewable technologies and put them to work in a business that their incumbent rivals understand but their renewable rivals are still trying to understand. They make money both by selling gadgets and investing in ventures that create new technology. They’re not trying to tap the wind at the moment of invention or make the best pie crusts in a perfect world. They’re just making investments that keep them prosperous.

This is not something that some solar energy companies might have undertaken: Almost all of the profits in the clean energy industry have been achieved by an elite few that have become successful through their mastery of the complicated economics of renewable energy.

Green investing has been called “clean,” but that means the disruption is rolling over everyone else. It is not unfair to say the green economy is increasingly performing the fundamental functions of a $6 trillion United States economy. It delivers everything from the energy that we use to the plants and trucks we use to make things. It’s providing an economic stimulus beyond that of renewable energy technology: Other industries have benefited from renewable energy, too. Solar power is an example, but solar buildings, hydropower and wind energy generation are now competitive with fossil fuels. So the green world is far from just something that happens to the solar energy industry.

There have been a few blips on the radar screen of early believers, although most of the first green investing money has gone to the right projects. The U.S. markets needed to adjust to new risks—about the oil crises, or the threat of cyber-threats. In the last decade, new offerings in renewable energy innovation and electricity generation started showing up on public stock exchanges, as well as for “green” companies that are focused on less exciting forms of manufacturing.

Now, a trend is happening: The infrastructure of investments to clean energy is changing the way the world operates. This is both good and bad.

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