The ups and downs of renewable energy projects like solar, wind and electric cars have shell-shocked investors, but this is not the death knell for eco-investment, and the smart investor will take a long-term view of the market and benefit from what is certainly a momentous global trend. More to the point, renewable energy isn’t the end-all for eco investments—it’s an economy-wide phenomenon.
Here are five reasons eco-investments are still smart investments, with a little creative foresight.
1. Environmental responsibility is a global trend that has gained irreversible momentum. According to a recent Harvard Business Review sustainability study, over the next two decades, companies demonstrating a commitment to environmental responsibility will have a superior record in terms of performance, specifically because they will be prepared against regulatory roller coasters and will be able to seamlessly adapt to legislative changes and technical requirements.
2. Eco investments are everywhere. Ecology and environment are issues that are not limited to the renewable energy sector, rather eco investments are a part of every sector. Because of this, investors should have greater foresight and broaden their perspective to make smart eco investments in mature industries. According to Brian Salerno of Huntington Funds in an interview with Kapitall, “long-term investors can earn return on capital when investing in identifiable trends.” Solar panels and electric cars, according to Salerno, are immature industries with “unproved business models”. Investors need to step away from a narrow focus and rethink their investment strategy from a longer-term perspective that has broader environmental responsibility as its focal point.
3. Investors can take advantage of the launch of the Huntington EcoLogical Strategy Shares ETF (HECO), which is an unprecedented exchange traded fund that specifically focuses on environmental-related investments. HECO looks at three key points in determining eco investment strategy: credit worthiness (solvency), management quality (management’s decision-making track record), and valuation (quantitative data demonstrating growth, profit and returns).
4. There are plenty of mature industries for eco-investors that fit into the global trend of environmental responsibility and will reap rewards for investors. Organic foods is one such mature industry with a proven track record. HECO has put much faith in Whole Foods and The Hain Celestial Group, who make everything from organic foods to organic skin-care products. The logic behind these investments: Children are products of their environment and the growing numbers being raised on organic products will funnel their own future investments in a like-minded way. In two decades, this will be clear, but it is now that investors need to take advantage of this proven trend. eBay, Inc is also on HECO’s top-ten list, and the argument that this is a sound eco investment is a solid one: “What’s more socially conscious than selling something that’s already made?” Also topping the list is Questar Corporation, which operates an integrated natural gas holding company, and BorgWarner, Inc, for its manufacture and global sale of engineered automotive systems and components primarily for power train applications. Even Johnson & Johnson and Starbucks make it on to the top ten list of eco investments.
5. Socially conscious investing is “exploding in the market place”, according to Kapitall, and mutually and actively managed funds have already surpassed$3 trillion in investments. The new trend is for consumers, shareholders and investors to pressure companies into a certain amount of corporate responsibility—something that was previously only the purview of the environmental activists. Sustainable business practices is the new buzz phrase, and not only for larger companies. According to Deloitte, “today’s leading organizations recognize that sustainability is an essential aspect of their business strategies. A broader, more strategic plan for sustainability can not only drive efficiency and innovation across the enterprise, but also satisfy customer needs and influence how their suppliers operate.” Consumers increasingly care about sustainable business practices. Speaking to Harvard Business Review, Unilever's Paul Polman believes there is a way to engage with consumers to that end and that there is a social media platform for such “social change” engagement. He points to Ben & Jerry’s ice cream as a precedent for this trend.
By. Jen Alic of Oilprice.com
Jen Alic is a geopolitical analyst, co-founder of ISA Intel in Sarajevo and Tel Aviv, and the former editor-in-chief of ISN Security Watch in Zurich.