REFLEXIONS
on Green Investing
By Robert Ross

 

 

"Let's say you want to change the world, but you don't have a lot of faith in protest rallies or politicians. What can a normal person with a full-time job do to make our world a better place? Socially-responsible investing (SRI) just might be the answer."
 - from:
Investopedia.com

According to the L.A. Times "green" was one of the most overused words in 2008. The concept of green has been around for decades, but recently the green trend has taken on legs. Companies have quickly jumped on the green bandwagon, hoping to be recognized as having a product or service that is green, through and through.

Hollywood celebrities want to be seen zipping about town in their Toyota Priuses, and politicians know that one way to a quick election victory is promising "green jobs."

An auto company runs a T.V. ad showing its manufacturing plant in a meadow-like setting with deer wandering about, appealing to our desire to be green - to be environmentally sensitive - in the process of buying a car. To be green, is to care, say the many green advocates.

So, is it possible to mix investing and corporate profits with saving planet earth? More than a few analysts say that the private sector - green companies - will be the catalyst for developing methodologies to stop today's environmentally-destructive practices. In the investment world, this mixing of profit with environmental sensitivity is called "Green Investing."

Loosely, green investing is investing in companies that are focusing on environmentally-friendly issues, like renewable energy. In fact, at this point in time, renewable-energy development is the poster child for green investing.

Matt Simmons, in his book Twilight in the Desert: The Coming Saudi Oil Shock and the World Economy states that the world has reached "peak oil," and going forward, fossil fuels will be in decline, while population growth and energy needs will increase. Matt Simmons has written numerous articles, a book, and contributed to films on the subject. He's also consulted with world governments, international corporations and traveled the globe to study this issue.

In a recent interview with Richard Loomis (www.worldenergy.tv), Simmons declared that gasoline prices will go higher - much higher - perhaps 12 to 15 dollars a gallon. If he is correct in his oil price prediction, development of green alternatives should be put on steroids.

We're at an historic inflection point; transitioning to a new form of sustainable energy. From burning wood, to burning coal, to burning oil, we are now destined for something new to meet our energy needs. So, what will that "something new" be?

Currently players in the renewable energy arena are: solar, wind, geothermal, hydropower, and biomass fuel (ethanol, bio diesel, wood, solid waste, etc.). Renewal energy accounts for about 7% of our energy needs in the U.S., with hydroelectric playing the largest role in the non-polluting renewable energy field.

The production and use of renewable energy has grown in recent years, partly due to higher oil prices, and also because of the encouragement, through subsidization, from State and Federal Government agencies. Most analysts agree that renewable energy will play an ever increasing role as we go forward. But just how large of a role, and what types of renewable energy will be used, remains to be seen.

Solar - the sun - has spoken to man since the dawn of time. From the Druids at Stonehenge to the Mayans of Central America, the sun has played a pivotal role in the world's cultures, both past and present. Today the sun speaks in a new language; the language of photovoltaic power. Some view solar power as the most promising of the alternative energy sources.

A quick check of the internet (Google: solar power companies) reveals hundreds of companies involved in the solar power industry. But as time passes, many of these companies will drop by the wayside, giving way to other successful, innovative organizations. Like it or not, it's survival of the fittest, even in the world of green.

Wind power recently caught the attention of T.V. viewers with the Boone Pickens' ad, promoting wind power to help alleviate our dependence on foreign oil. General Electric is also promoting itself with a T.V. ad, as a player in the wind power field. GE manufactures wind turbines. Wind, like solar, holds promise, but it's not "it" in terms of solving our dependence on fossil fuels.

Geothermal has been a successful method of generating electricity from deep heat generating wells. Like wind and solar, geothermal is successful only in areas where this geothermal heat can be tapped into.

Hydroelectric power has been viable for over a hundred years. The hydroelectric plant harnesses the power of a flowing body of water. It's a clean form of energy, but there are only so many rivers that can be utilized. This concept of harnessing the movement of water is being studied in terms of harnessing the ocean wave and tidal power; a fascinating concept that holds much promise.

Biofuels made their entry into public consciousness with the government's plan to create ethanol out of corn. This has been a controversial program, requiring tax payer's money to subsidize many corn growers.

Some claim that it takes an equal amount of petroleum products to produce ethanol, leaving ethanol net energy neutral. Others question the use of a food product like corn, for energy use, rather than following the Brazilian model which focuses on the use of switchgrass.

There is no one magic bullet, a non-polluting, easy-to-develop source of energy that will solve our needs. At best, looking ahead, we'll probably use multiple protocols e.g., wind in the Midwest corridor as Boone Pickens was suggesting, and solar panels in the Southwest; an alterative-energy basket approach.

There are plenty of promising investment avenues in the green-energy field. For those interested in green investing, simply plug the word solar or wind, or green energy into your favorite search engine - there's a lot of information out there in cyber space.

Also, understand that many of the upstart companies with great ideas and an abundance of enthusiasm, will fall by the wayside in the coming years. It's a very competitive field, so do your homework.

Another investment approach one might consider is investing in a green mutual fund. A green mutual fund does much of the homework for you, investing in a basket of green companies, often in a variety of alternative energy fields.

In the end, do your homework and consult with a qualified investment professional before making any investment decision. Fortunes will be made in green investing, but fortunes will also be lost. Did I mention . . . do your homework?

 

Disclaimer: Nothing contained herein is intended as investment advice or recommendations for specific investment decisions. Consult a qualified professional before making any investment decision.

Robert Ross can be reached at SanDiegoRoss@Yahoo.com

Copyright 2009 by Robert Ross, all rights reserved


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