Top Ten Ways to Invest in the Green Revolution
I have been involved in the renewable energy industry for over twenty-five years, and one question I get asked almost on a daily basis is:
“How can I participate?”
The questions come from a broad variety of people from multiple demographic backgrounds: friends; people at backyard barbeques; parents or grandparents on the sidelines at hockey and soccer games; taxi or Uber drivers; and people in grocery store line ups.
Many of the questions I get, revolve around investment products and the plethora of advertising that targets investors with so called Green investment options.
Based on the interest, I thought it would be fun to post a blog outlining ten ways that any individual can invest in the Green Revolution. My top ten list (apologies to David Letterman) covers a spectrum of investments ranging from simple lifestyle adjustments to complicated financial products.
Bear in mind that as with any decision one makes, it is absolutely critical that you do your own due diligence. I am amazed at the number of products that are advertised cloaked in pictures of wind turbines and solar panels, and when you look under the covers, you find that they are investing in plastic wrap, or oil and gas companies!
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In no order of preference …
1) Reduce Transportation Energy Consumption
This is the easiest and cheapest way to invest: walk, bike, or take public transit. I have been a dedicated bike commuter for about 15 years and it works for the most part, but even I have to admit that getting your daughter to 6 am hockey practice by bike is not practical!
Pros: small up-front investment cost; maximum investor control; health benefits.
Cons: may be inconvenient; limited ability to create impact at scale.
2) Reduce Household Energy Consumption
Strategies such as turning down the thermostat and wearing a sweater, or turning off parasitic loads. Investments in energy efficiency products as CFL lightbulbs, weather-stripping, triple paned windows, high efficiency furnaces.
Pros: range of investment costs; some investor control; can do small scale changes as a renter.
Cons: range of up-front costs from low to very high; long payback period; scale limited to household consumption; need to be a homeowner for large projects.
3) Buy an Electric Vehicle
Pros: EV’s are very cool; low annual operating costs (no hot parts, no transmission!); investor control.
Cons: high up-front cost; range anxiety, limited availability; limited ability to impact at scale.
4) Invest in Solar Panels for your House
Pros: investor control; reduced reliance on the friendly neighbourhood utility.
Cons: High up-front investment; very long term payback; limited ability to impact at scale; you need to own a house.
5) Invest in Publicly Traded Large Scale Renewable Energy Developers
Pros: liquid investment; annual dividends; generally low risk, recurring revenue stream.
Cons: diversification risk as tend to be focused on a small number of geographies and one or two renewable technologies; growth tends to be lumpy and dependent on project life cycle.
6) Invest in Publicly Traded Renewable Energy Equipment Manufacturers
This approach takes a page out of the history of the Klondike Gold Rush. The vendors selling picks and shovels outperformed the prospectors and miners.
Pros: liquid investment.
Cons: investor takes technology risk; equipment is evolving at a very rapid pace; revenue stream is high risk, non-recurring.
7) Invest in Groups Building Green Energy Infrastructure in the Developing World
This is an incredibly cost effective way to reduce greenhouse gas emissions. For example, over 200 million people in Africa are not connected to the electricity grid and burn kerosene as a light source. Similarly many Island nations in the Caribbean are still burning diesel to generate electricity.
Pros: very high carbon emission reduction impact to invested dollar ratio.
Cons: illiquid; not necessarily an established return on investment; due diligence on the investments can be difficult.
8) Invest in “Green” Exchange Traded Funds (ETFs)
Pros: easy; liquid investment; low management fees.
Cons: lack of transparency regarding the underlying investments; requires investor due diligence; no guarantee that investments are “green”.
9) Invest in “Green” Mutual Funds
Pros: easy; generally liquid investment.
Cons: high management fees; lack of transparency regarding the underlying investments; requires investor due diligence; no guarantee that ultimate investments are “green”.
10) Invest in Green Bonds
Pros: direct project investment; high level of transparency; recurring return to investor
Cons: illiquid in the short term; lack of product in the market place; high brokerage fees to hold the investment.
BONUS: Create your Own Solution
Professionally, I have always wanted to do something that would make the world a better place and make money for others. As an investor, I have always wanted to find an investment that made a positive impact, provides a strong return, stable distribution, long-term growth and capital protection.
While there are some products that check one or a few boxes, I could not find any that checked all five. So, thinking outside the box ... we created something unique!
Please continue to browse our website as we continue to add new information to help you – we are trying to democratize investment in the Green Revolution!
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Peter Leighton is the Chief Operating Officer at RE Royalties. He is an experienced renewable energy executive with over 20 years of experience in mergers & acquisitions and project development in the energy sector.