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Lee Hilliard and Linda Hilliard, a retired media consultant from Manchester, Conn. were unsure what to do about their investment portfolio a few years back. He was a retired media consultant of 72 years and his wife, Linda, 64. They had bought some Chevron CVX shares, -2.49% shares in 2016, and again in 2018 after Linda's death. The couple disagreed about what to do with the stock.
Linda believed that the shares were part her father's legacy. And, hey, they were paying decent returns to boot. Lee was not happy.
He recalls feeling bad about the oil stock. As climate change becomes more significant, I would say that over the past five year I started paying attention to it and decided that it would be better to not invest in a fossil fuel business and to maybe use that money to fund something greener.
He is in good company. According to the Global Sustainable Investment Alliance, around a third of all assets worldwide are now managed with sustainability in mind. It is a significant shift if it is even close.
Why green investing is thriving
Green investing was a strategy that put your money where it would help the environment. One of the criticisms of this strategy was that it did not allow for diversification. Not all companies doing well will do well.
Recent events, such as the extreme heat and wildfires that erupted in the west U.S., the devastating floods in Germany, China, and the first ever extreme heat advisory issued by British weather authorities, only add to the chorus of warnings about severe climate impacts.
These events have exposed the risks for businesses around the world and it is clear that climate change investing has become a priority. Globally, $178 billion was invested by investors in green investment funds during the first quarter 2021.
It is real. It is real. Lucas Mansberger, an investment strategist at Greenleaf Trust (based in Kalamazoo Mich.), says you need to know all about it. Greenleaf is not a firm that focuses exclusively on green investments, despite its name.
Mansberger stated that environmental issues such as the heat waves in the west and rising sea levels are becoming more important to investors and companies than they were 20 or 30 years ago. This is why you get more attention from the investors.
CNBC announced that a new trend in green investing was being developed one year ago as the COVID-19 pandemic stole headlines. This announcement was made partly by Larry Fink, the CEO of BlackRock, BLK +0.21%, who predicted that the imperatives surrounding climate change would lead to a fundamental restructuring of finance.
Fink, who at the time managed $7 trillion in assets, advised that investors, governments, and companies should be prepared for significant capital reallocations.
Ambitious climate goals for the Biden administration
Now fast forward to 2021. The Biden administration has made climate one of its top priorities and set the nation's most ambitious environmental goals. The goals include halving greenhouse gas emissions by 2030, creating a carbon-free electric grid by 2035, and becoming a net zero-carbon nation by 2050.
If President Joe Biden can push his comprehensive climate program through Congress, or even a fraction of it, tens to billions in incentives and programs will be released to benefit businesses in the business of decarbonizing America. The current infrastructure plan includes $73 billion for upgrading the nation's electrical grid and expanding renewable resources. More than $15 billion is earmarked to purchase electric vehicles, charging stations and clean transit projects.
Check out: Which stocks and industries will be benefited by the infrastructure bill?
Manberger predicts that the required investments will be more extensive than this. Climate resilience investments, generally for coastal communities. Modernizing infrastructure to adapt to changing weather patterns. Infrastructure. We were in the first few innings.
How can individual investors benefit from this?
Another way is to invest in stocks, mutual funds, and exchange-traded fund (ETFs), that are owned by them.
Biden's administration seeks bipartisan support for a 10-year extension to clean-energy tax credits. This will give a boost to the players in the solar/wind energy sector. RMI, a pro clean-energy think tank, has reported that this is the best year to invest in clean energy solutions and phase out fossil fuel infrastructure.
If you think investing in carbon-reducing technologies and companies seems easy, just take a deep breath. There are no guarantees with any investment.
The Hilliards channeled some of their Chevron shares proceeds into stock in three young electric vehicle (EVS) companies in 2019. One of the companies took off. The other two are still in decline and worth less than what they paid.
Their experience shows one of the dangers of trying to pick winners from a maze dominated by new technology that aims to support a low-carbon economy. According to The Economist, a Chinese manufacturer of EVs has projected a market explosion with up to 300 companies producing vehicles. This will be followed by a shakeout that will leave only a few survivors.
Where can I find investment opportunities
Mansberger states that there are many investment opportunities in this energy revival, but it is a minefield.
He says that we don't recommend that clients try to pick individual winners or losers. If you really want to try it, don't put in more than what you can afford to lose. Many of the companies at the forefront of these technologies work in dynamic industries. They will be volatile.
Mansberger advises spreading your risk by investing in mutual funds, ETFs or other diversifying investments in the green industry.
Find out more: How much should you invest. How to get started investing
It is also a good idea to do some introspection.
Mansberger says that you need to do some research, both in terms of sustainability goals and your investment goals. Are there any reasons you are interested in green investment? What are you trying to achieve? What are your most passionate about?
Next, you can check an online database to find which funds are geared towards sustainable investments.
Mansberger cites websites such as Real Impact Tracker or FossilFreeFunds.com that can help you sort the wheat from the chaff when it comes to corporate sustainability claims.
He also mentioned that Morningstar MORN +1.21%, a fund-tracker, now provides information on the sustainability of a fund's holdings.
Next: Attention Attenborough and Trump, Greta Thunberg receives a BBC series
One thing is certain: The once-independent cottage industry of green investment is now a major force to be reckoned, and that's just a reflection on where the world is headed.
Mansberger says that it's no longer about doing good deeds. It's about the future economy.
Craig Miller's broadcasting and journalism career spans over 40 years. However, since 2008, Miller has focused on climate science and policy. Miller was the founder and editor of Climate Watch, a multimedia project that won an award for San Francisco. He also served as science editor at KQED until August 2019. Miller spent 20 years as a TV reporter and document producer at major-market stations as well as CNN, MSNBC, and other news organizations. He spends his time on the water, in his kayak or on a mountain lake.
This article was reprinted with permission from NextAvenue.org, Inc. 2021 Twin Cities Public Television, Inc.
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