Is It Time to Invest in the Green Revolution?
Writer Cesar Zambrano thinks it’s time to take another look at Green investing. In his three-part series, he will explore some of the opportunities and pitfalls of Green investing. Please note that these articles do not constitute specific investment advice and are merely the opinion of the author. If you have investment questions, please speak with a licensed investment counselor. — Julia Wasson, Publisher
You have been a consistent supporter of today’s Green Revolution. You employ the latest conservation techniques in your home, you buy the best organic foods for your family, and you support products from companies that have earned a great reputation for protecting the planet. But, have you considered investing your precious nest egg where your mind is, in the emerging “Greentech” industry?
Green companies are no longer just a bunch of start-ups and emerging growth companies, implying high risk and showing very little revenue for their efforts. Quite to the contrary, there were several companies in the Green sector that outperformed the S&P 500’s gain of 28.8% for 2009, and quite a few others with multiples of that figure greater than the five fingers on your right hand. Mutual and index funds were not immune to this success either, as interest gathered for this “non-traditional” area of investment.
Many industry analysts have been touting “Green” investments for years. As with other stocks, their performance in 2008 was anything but stellar, but all regained their upward momentum in 2009. Presently the stock market is in a correction mode. Stocks have fallen over the past week due to concerns about the European debt crisis and the uncertainty of the global economic recovery. However, signs indicate that bottoms are being reached and that a favorable buying opportunity is at hand for the informed.
Forecasts for the future of Cleantech are more than optimistic, and many experts believe that the superiority of investments in this sector is merely an issue of simple math. Wind, solar, and geothermal have all made the headline news when it comes to their future potential. The Energy Independence and Security Act of 2007 also established aggressive goals for biofuels, a twenty-fold increase over the next decade. The “simple math” suggests that renewables will grow at double-digits for some time to come. All companies that produce, support the efforts of producers, or assist those wanting to make an environmental difference will all prosper handsomely in the years to come.
Amidst much fanfare in July of 2009, the oil giant, ExxonMobil, announced it will invest heavily, some $600 million, into the production of algae-based biofuels. Dow Chemical declared similar intentions the week before for the production of plastics. Company scientists, however, admitted that it will take a minimum of 5–10 years for production to reach economically feasible levels; but for Exxon, it represented a major change in direction. Energy primarily derived from fossil fuels supplies 86% of our current annual consumption requirements. Nuclear accounts for 8.6%, and renewable energy sources, “clean energy,” make up the balance of 7.4%.
Federal policies encouraging a transition will soon be forthcoming, while other markets, Europe and Asia, are well ahead of us. However, as of this writing, 27 states have adopted binding Renewable Portfolio Standards, or RPS for short. This legislation mandates targets for utilities operating in the state to generate a certain percentage of their electricity from renewables. Some are as high as 40% by 2017.
Does this mean that we should rush out to buy stock in Exxon or any algae-based company we can find? Of course not! The keys to prudent investing are preparation and knowledge. Google “green investments” and read as much as you can about them. Familiarity is the goal. But before we can talk about where to invest your capital, we need to address the topic of investment fraud. Stay tuned for Part 2 of this trilogy, because nothing will ruin your investment experience more than being the victim of a scam artist.
Blue Planet Green Living (Home Page)
Cesar Zambrano is a writer at ForexFraud.com.
Part 1: Is It Time to Invest in the Green Revolution? (Top of Page)
Part 2: Fraud Can Spoil Your Green Investment Strategy
Part 3: Investment Options in the Cleantech Industry