Green investment is all the rage. But does it deliver? Does it pay off and produce strong profits for the investor.
This piece in the latest edition of The Economist, Backing greens with greenbacks, advises us to exercise some caution.
"Most green companies are not a matter of a couple of geeks and a website. Just as telecom companies laid down billions of dollars worth of fibre-optic cables, environmental companies require large amounts of capital-for building a wind farm or a tidal barrage-or the patience to invest in new technologies, such as cellulosic ethanol or thin-film solar panels.
"This means that the shares are likely to be volatile. The returns are highly uncertain, because the big profits (if any) are many years away. News events such as technological breakthroughs or changes in government policy will have a much bigger impact on valuations."
Part of the problem is the many competing solutions to climate change. One day it's solar, the next day it's wind, then it's geothermal energy. Which makes it very hard for investors to pick winners.
But while climate change and oil prices remain key issues, there will be no shortage of investors willing to put up the money. They should not expect immediate returns.
Until the problem of man-made induced climate change is solved, investing in green technologies and funds will continue unabated. And, yes it will be risky and discerning what will be successful among them is another matter!
For your information, I’ve been following green/ethical investing for around forty years and have a website which covers all the latest global green and ethical investing news at http://investingforthesoul.com/
Best wishes, Ron Robins
I think that the BW piece is right. There is no doubt that green or renewable technologies are on the upswing – but just like the internet – there are things that will make sense and things that won’t. Investors will need to be prudent about the choices they make – for instance there is no doubt that solar stocks are wildly overvalued right now – this doesn’t mean you won’t make money in them – just that if you do it will be as a speculator rather than investor.