Hoboken, NJ (June 2008)—Sure, you’d like to “go green” in your investments. If you could find some financially sound options, why not? As environmental issues have heated up and gained more and more press, you’ve embraced the concept of saving the planet. You’ve changed your light bulbs, strived to live the “reduce, reuse, and recycle” mantra, and even traded in your gas-guzzling SUV for a hybrid. (Well, at least you’ve considered it!) Problem is, you need to feel secure about your retirement years—and the concept of green investing just seems a little too, well, trendy for comfort.
Jim Mellon and Al Chalabi say such fears are unfounded. In fact, the opposite is true. As our planet’s dwindling resources become ever more scarce, and the need to find alternate energy sources becomes more pressing, green investing will start paying off in a big way. Getting in the right markets now can help you create a prosperous future—and in an age where traditional retirement avenues are failing, that’s no small feat.
“As baby boomers age and retire and modern medicine keeps us all alive longer, the pension plans set up by corporations and governments are becoming ever more strained,” says Mellon, coauthor along with Al Chalabi of the new book The Top 10 Investments for the Next 10 Years: BigIdeas, MoneyFountains and Your Path to Prosperity (Wiley, February 2008, ISBN: 978-1-84112-802-3, $29.95). “You simply can’t rely on those sources to keep you going when it’s time for you to retire. That’s why it is so important to be a savvy investor now. And going green with at least some of your investments is a sure moneymaker.”
The authors explain that, in investment terms, the biggest theme of all over the next ten years will be the broadly defined “green” movement. New methods of generating power, conservation measures, and changing fiscal regimes in relation to the use of power will create some of the biggest global investment opportunities.
“Significant amounts of capital in almost every part of the world are already being deployed to take advantage of these trends,” says Mellon. “New plants are being built to manufacture photovoltaic cells for solar power projects. Hydrogen fuel cells are being developed at a rapid rate to a point near commercialization. And nuclear power stations are being planned or built in quantity. In addition, wind farms now dot many landscapes. The whole ‘renewables and new energy’ industry is on the cusp of a breathtaking advance.”
Wondering how you can take advantage of these growing green opportunities? Here are just a few tips that could help you prosper:
Put your money in renewables. Most developed nations are racing to figure out how to make the move to green energy. From wind farms to tidal and wave projects; from waste-to-heat projects to more extensive nuclear generation; with, of course, solar power coming up on the rails—the race is on to transform the electrical energy generating landscape of the world.
“Perhaps the most visible of these initiatives occurs in the form of wind power,” says Mellon. “All across Europe, wind farms are sprouting like mushrooms. An industry once derided as a novelty is now a multi-billion euro/dollar sector all on its own. But beware: If you choose to invest in the wind farm sector, do your research first. This is a capital-intensive business, subject to a lot of government interference and scrutiny, and some sophisticated investors have already gotten there first and creamed off some of the good potential returns.”
Invest in these conservation companies. Companies involved in conservation, wind power, and nuclear power are likely to see significant growth in coming years, and that’s good news for the environment and their investors. One company worth looking into in those areas is Fuel Tech, a US company that is working to cut a substantial percentage of carbon emissions from fuel combustion units. Or check out Clean Air Power, which is a London-listed company working to get trucks to use natural gas. And, of course, there is nuclear. In this area investors might want to look at Niger Uranium, a London-listed company exploring for uranium in Africa.
“Like any realm of investing, it’s one thing to know the options are out there, and a completely different story knowing exactly which companies to look into,” says Mellon. “These are all great green options.”
G is for Green…and Germany. Germany is the world’s biggest consumer of PV cells—which are used to make solar panels—because of the favorable fiscal and monetary regime for solar power in that country. Today, the country accounts for half of all the solar PVs installed in the world. The reason that the German market is growing so fast is because of the so-called Feed-in-Tariff. This means that anyone connected to the grid (and that includes private homes) gets a guaranteed payment for putting green electricity into the grid of about four times the market rate—and that goes for solar PV, wind, or hydroelectricity.
“Germany has been so aggressive in promoting solar power that several world-beating companies have grown up to satisfy the local—and subsidized—domestic demand,” says Mellon. “Q-Cells is one example—the company started making PV cells in Germany in 2000 with 19 staff members. Today, it has over 1,500. It exports half of its product and is the world’s second largest maker of PV cells, after Sharp of Japan. And if you’re looking to invest, the company might be good place to start.”
Invest in the elements. Big money is in investing in the extractive industries, which mine the key components of solar panels. Gallium, indium, germanium, and other materials are vital to the PV story, and the companies that mine and extract these components are a great place to invest your money.
“Jellon Limited is doing it,” says Mellon. “Other promising options include: Recyclex, a French company producing gallium amongst other metals; New Jersey Mining Company, which produces gallium from mining operations in Idaho; Gold Canyon Resources, which has prospective gallium deposits in Nevada; Bluglass, an Australian producer of gallium; Dowa Mining, listed in Japan, it is the world’s largest producer of Gallium; and AXT INC, a NASDAQ-listed maker of satellite solar panels, mainly producing semiconductor substrates for electronic and optoelectronic uses.”
“Carbon” trading in the European Union shows promise. Countries that are part of the Kyoto Protocol have been forced to figure out how to limit their carbon emissions without damaging the economies in their countries. One way many European countries are doing this is through an Emissions Trading Scheme in which each country can emit one ton of carbon dioxide. The country then assigns permits to their biggest emitters allowing them certain amounts of emissions. Any company not needing its whole allocation is then free to sell the surplus in the ETS market where the buyers are typically companies that need more than their allocations.
“The idea is that, because there is value to these permits, companies will be encouraged to invest in green technologies, especially as the ‘cap’ on total allowable emissions gets progressively lower, making fewer of the permits available in future years,” says Mellon. “The ETS market is becoming a large and interesting one. Investors may wish to consider looking at funds that offer an entry to investing in such permits—one such is Climate Change Capital, listed on the London Stock Exchange.”
Learn more about camelina. Although most “bio fuels”—crop-based fuels—make very little ecological or financial sense, there is one crop that would be worth investors’ keeping an eye on. “This crop is ‘camelina,’ which is an interesting low-cost feedstock for biodiesel,” says Mellon. “It has high energy, is non-food (so that food production is being diverted into energy), uses marginal land that requires no irrigation, is sustainable, and has a very low cost per liter. There are no publicly available companies in this space as of yet, but if you’re interested, keep an eye out for some of them to pop up. Check out www.camelinacompany.com.”
A move away from landfills will be profitable. Another area of potential interest is waste-to-energy systems. Here, the problems from using landfill sites in many industrialized countries—including the space constraints and the by-production of dangerous methane gas—are opening the doors for a new industry to develop.
“The waste-to-energy industry is one that seeks to turn waste into energy by burning it, or by using the by-product methane gas, which results from disposal of any organic waste, to generate heat and electricity,” says Mellon. “Companies involved in the waste industry worldwide include UK companies Shanks and Biffa, both listed on the London Stock Exchange. These companies are already involved in landfill site management, waste collection, recycling, and disposal. Another is the Japanese company Daiseki, which is that country’s only nationwide industrial waste operator. Other promising opportunities are with Séché Environnement in France and Lasila Tikanoja of Finland, both involved in new recycling technologies.”
Energy-saving will help you save in more ways than one. Within the next few years, energy-saving gadgets could be commonplace in all households. Already people are switching to low-energy lightbulbs, and other products are sure to follow. “Imagine all the computers that are turned on in the world right now,” says Mellon. “How much energy would be saved globally if each new PC sold came with a fan or cooling device that was just 5 percent more efficient? The same goes for TVs, fridges, heaters, air conditioners, etc. With energy-savings, it’s a numbers game—historically, we haven’t bothered to fine-tune energy consumption of devices because energy supply has not been an issue. But now there are just so many devices in every household that it’s really adding to the problem. Look for more companies to pop up that will provide energy-saving solutions for the household appliances we use every day.”
Overwhelmed? Invest in an ETF. The sheer volume of opportunities in the green market can be overwhelming for any investor. Luckily, investors can take advantage of this market by investing in alternative energy in a more general sense through the Market Vectors Global Alternative Energy ETF, which trades in the US under the symbol GEX. The holdings of the fund range between 1 and 11 percent. Before the fund invests, companies must meet the following requirements: 1) Represent the 30 stocks in the Ardour Global IndexSM (composite) with the highest average trading volume and market capitalization, 2) Have a market cap exceeding $100 million, 3) Have a three-month trading price greater than $1.00, 4) Be involved in the business of the alternative energy industry (i.e., derive over 50 percent of total revenues from the industry).You can read more about this ETF by visiting www.vaneck.com.
“It is not for us to judge whether or not we may all be burnt to cinders by the sun in 30 years or so, unless these developments are successful,” says Mellon. “It is enough for us to say only that these green opportunities are a gold rush at its very earliest stages, and it’s a gold rush that every serious investor should consider.
“That said, investors should remember to always diversify their investments,” he continues. “The green realm is full of promise, but having too many eggs in one basket always carries risks. There are other great opportunities out there with real estate, commodities, and more. To ensure your investments have made the most for you over the next ten years, you’ll want to check those out as well.”
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About the Book:
The Top 10 Investments for the Next 10 Years: BigIdeas, MoneyFountains and Your Path to Prosperity (Wiley, February 2008, ISBN: 978-1-84112-802-3, $29.95) is available at bookstores nationwide, from major online booksellers, and direct from the publisher by calling 800-225-5945. In Canada, call 800-567-4797.
About the Authors:
Jim Mellon is an investor with interests in several industries. After leaving Oxford in 1979, where he studied PPE, he worked in Asia and the United States in two fund management companies, GT and Thornton, before establishing his own business in 1991. This now has two components?a listed fund management company?Charlemagne Capital?and an Asian mining group, Regent Pacific. In addition, Jim is the controlling shareholder and a director of Conister Trust, an Isle of Man based bank, Speymill Group, a property business, and Betinternet. He is co-founder of Uramin and Red Dragon Resources, both listed mining groups. Burnbrae, his private company, is a substantial landlord in Germany and in the Isle of Man, and also owns the hotel chain Sleepwell Hotels. Jim spends most of his time working on startup ideas and on investing. He lives in the Isle of Man and Ibiza.
Al Chalabi is a business consultant, entrepreneur, and author who has been based in Asia for eleven years and has extensive experience of developing economies. He helps corporations establish and grow their operations in Asia, particularly in emerging economies like China. He has a bachelor?s degree in Aerospace Engineering and an MBA in Finance & Management. Originally from Iraq, Al grew up in the UK after his family moved there when he was a young child. Al has also lived in Canada, France, and the United States and currently lives in Hong Kong.
