Green Venture

Over the past decade, investors across the globe are beginning to witness a new economic and investment philosophy seeking to achieve positive momentum across the global markets. As many of the trendy yet high-risk investments of the past decade (financial services etc) stagger on the edge of insolvency, a new wave of investment opportunities brought about by initiatives to contain and combat global climate change are showing positive signs of strength.

The need to combat climate change impact and to rethink energy deployment is unquestionable. Polar bears are officially an endangered species on the verge of extinction. Dramatic weather events continue to take place across the world and developed nations still face oil crises over the past few decades.

These compelling issues served as catalysts to force the US government to approve comprehensive climate legislation designed to boost investments in clean energy and address climate change matters directly. As the current Obama administration moves to introduce a climate change stimulus that will include energy efficiency incentives, renewable funding and subsequent climate legislation, this will present a window of opportunity for global investors to take advantage of and support the urgent call for change.

Identifying and Seizing the Economic/Investment Opportunities

As the global economy situation continues to stabilize, investors will start to flock back to the markets and look for fundamental opportunities so as to invest for the long term. As mentioned earlier, legislations and bills will pave the way to make environmentally-oriented business sustainable. As a result, the long term durability of these enterprises will present stable growth investment opportunities for all investors.

For an individual to understand the potential upside opportunity, let us first seek to recognize the consequences of failing to address climate change. As noted in a recent Foreign Affairs report, “The economic costs of unchecked global warming will be severe... In 2007, the IPCC estimated that global warming could lead to continuing global GDP losses of one to five percent and even greater losses at the regional and local levels.”

At the broader and macro level, it is important to note that the growth in climate-oriented sectors is critical to both nation building and sustainability. At the micro level, investors can seek to hunt down potential investment opportunities by identifying companies that are fundamentally strong and position to prosper on a green playing field that will include a price on carbon emissions. One positive aspect is that investors can reap positive long term returns while injecting fresh capital to progressive green ventures that will shape the new economy.

A point to note is that there is a band of eight industries that primary focus on reducing carbon emissions. It is also worthwhile to note that initiatives and industries in the areas of promoting industrial, transportation and buildings efficiency are often top priorities under the green venture scheme, but all eight industries will play their contributing roles accordingly.

The EU has already pledged to drive down its carbon emissions by introducing a cap and trade system. It is highly possible that the U.S. is also likely to pass its own major legislation designed to motivate qualifying companies in these sectors. The direct impact will be to demonstrate the long- term commitment towards this sector and allay any fears, doubts for energy sector investors plus aggressive federal incentives for efficiency and renewable starting in 2010. Another direct implication may possibly be the implementation of a full cap and trade system to control carbon emissions. As a result, this may lead to a series of multiplier and spill over effects and aid in the global economy recovery process. It is worthwhile to note that the enforcement of incentives and penalties will facilitate low carbon players to acquire a 15 to 60 percent cost advantage. Coupled with complex interactions across all eight solution sectors, this will open up clear growth opportunities for investors. According to a report by the Natural Resources Defense Council (NRDC), “Global investment in new renewable energy installations totaled $100 billion in 2007, up from $15 billion in 2000 (and) renewable energy resources are spread across the United States.”

Another investment opportunity to focus on will be the Building development industry. Gold standards in LEED (Leadership in Energy and Environmental Design) Certifications are viewed as almost quaint by now. Indeed, in many cases design and construction projects have become races to see who can create the “greenest” building possible.

The main rationale is because many entrepreneurs recognize the need for current improvement for their future’s sake. In other words, the path to business success and progress is to view climate change containment as a channel for global economic transformation.

Latest Green Venture Developments

Transformation investments into the energy sector are not exceptional. However, the amount of investment and monetary resources required in the near future will be precedent. Europe began to venture into alternative energy in the late 1970s and this led to a series of revolutionary changes. For example, France uses 15 percent less oil today than it did in 1975. It seems likely that the U.S will follow suit especially in light of the recent fossil fuel price volatility. Many green venture enterprises will demand the U.S government to assume the position of a good role model by establishing a clear and sustainable playing field for innovative changes. In the meantime, states and municipalities are taking the charge up on their own. 17 states representing 45 percent of the U.S. population have committed to greenhouse gas emission reduction targets, and more than 700 cities have pledged to cut emissions and called for federal legislation to do the same. While there are a number of distinct initiatives, PlaNYC’s website details an aggressive energy strategy: “New York City's government spends nearly $800 million a year on electricity, natural gas, and heating oil and consumes roughly 6.5% of the city's energy...We will propose an amendment to the City Charter requiring that New York City invest, each year, an amount equal to 10% of its energy expenses in energy-saving measures...the City will achieve a 30 percent reduction in municipal greenhouse gas emissions by 2017. While it will cost $2.3 million, the City will begin to break even in fiscal year 2013 due to energy cost savings.”

It’s all about Being Patient

In conclusion, there seems to be a rising emphasis on energy-focused investments. The introduction of climate legislations across various developed and emerging nations will serve to unleash and launch entirely new clean energy industries. At the same time, it will also open up new projects, provide government incentivized funding. All these will seek to address and resolve any uncertainties among all fundamental investors. At a philosophical level, this gives investors an opportunity to change around their expectations for their investment rate of returns, as the source of value will be found in less risk and more realistic gains. Moving forward, investors will seek to add a new asset class and dimension to their portfolios while the business world evolves to a new set of climate-sensitive standards. The symbiotic nature of those tasks is self evident; as legislation is formed, debated, and eventually passed; intelligent investors will recognize the appeal of sustainable investments that are built to thrive in the future.

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