Reader Writes:
Do you really believe that the market in green investment will only take off when governments take it seriously?
The answer is categorically yes although evidence shows that canny investment now in appropriate investment in green energy is already paying dividends. Take Vestas, the wind turbine manufacturer. Their share price virtually stayed the same for three years and from January 2006 until now the price shot up near 271%. 1
Let’s look at some key points: the world has identified that we are using the wrong fuels and also that we have an energy crisis. The problem is that governments have not formalised a policy on the issue and this creates concern.
In the US, the Republicans are noted as believing that only 20% of global warming relates to human agency! 46% believe the world is getting warmer yet an amazing 51% of republicans believe the government should take action to protect climate change! 2 Confused? With that sort of confusion it’s no wonder the markets will be volatile in relation to energy.
Whilst our government is keen to slap taxes on 4x4s it’s also worth noting that the jeep wrangler 4×4 is the most friendly vehicle to the environment.3 Indeed we are led to believe (so we can be taxed more) that cars which burn fuel at a high rate are bad for the environment. Whilst there is an amount of truth in that, the key issue is to look at the whole picture.
The results of study show that the manufacturing and disposal of cars is actually the biggest pollutant and so we should be making fewer cars and instead keeping them longer (but that would stuff the car industry, so that’s not going to happen). One of the most alarming issues with the ‘dust to dust report’ pointed that the so called number one green cars (the hybrid models) which top all green charts everywhere I look, weren’t even in the top 50.
The total energy cost per mile of a luxury hybrid model came in at a staggering 20 times more than a Jeep Wrangler.
Notwithstanding any of this there is no doubt that energy is an issue. ‘Dirty’ fuels such as oil and coal have an upward sloping futures price (basically the stock market confirms the only way for their price is up). Interesting oil products future curves are also sloping upwards too. The cleaner electric and natural gas curves are flat and downward (the market believes their price will not increase). 2
From this we can deduce the market believes the current government policy changes will not reduce the demand for the dirtier fuels. The international energy agency (IEA) also believes that without a policy regime, oil and coal will still retain their dominance for 25 years.
This is worrying given that energy demand is expected to rise by just over 50% in the next 25 years. What’s more worrying is that the world is not investing sufficiently to sustain the current supply let alone meet future demand. 2
Since coal and oil are the biggest co2 emitters we have a big problem. Increased co2 emissions is not an option. The Stern report points to 2-5 degree warming over the next 45 years. The middle band here takes us to a temperature we haven’t experienced for over three million years. If we don’t stabilise, but carry on as we are, the expected target is 6.5 degrees before accounting for feedback risks with an upper boundary of ten degrees. 2 This is not an option.
Over $20 trillion dollars of investment is needed, however, of which 50% is to replace existing infrastructure.
In the absence of a policy regime this will be slow to come forward. When it does, the non green investor may well be green with envy.
For advice on the best green funds or if you have a financial query, call 0800 0112825 to speak to an Independent Financial Adviser or e-mail info@wwfp.net
Read more about Ethical & Green Investments
Worldwide Financial Planning Ltd are authorised and regulated by the Financial Services Authority. ‘The FSA does not regulate Credit Cards, Will Writing and some forms of mortgage and Inheritance Tax Planning.’
Information given is for general guidance only, and specific advice should be taken before acting on any suggestions made.
The above represents the personal opinions of Peter McGahan.
All information is based on our understanding of current tax practices, which are subject to change.
The value of shares and investments can go down as well as up.
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