Investing in clean energy is both an economic and a moral decision.
From an economic perspective, I believe that constrained supplies of fossil
fuels (not just Peak Oil, but also Peak Coal and
Gas) are leading to a
permanent rise in the value of all forms of energy. From a moral
perspective, I know that we and the vast majority of our children are limited to
this one planet for generations to come, so we should abuse it as little as
possible, so, of all the possible forms of energy to invest in, clean energy (Renewable
and Energy Efficiency) is my moral choices.
A Short Walk Down Wall Street
The investing decision does not have to stop there. In addition to
buying stocks we like, we can also sell (short) the stocks we hate.
There's a lot of truth in the caricature that environmentalists are much clearer
about what we don't like (cars, mining, coal, pollution) than what we do.
For instance, "organic" is typically defined by the processes which are
not used (chemical fertilizers, GMOs, pesticides) rather than those that are.
Smart Growth means
"avoiding urban sprawl." Those of us worried about global
climate change want to reduce Greenhouse Gas Emissions.
I may be exaggerating, I also believe there is more than a (sustainable,
local, organic) grain of truth in the caricature of the environmentalist as the
wild-eyed environmentalist who chains himself to a tree (or runs
around naked) in an attempt to stop some blight on the face of the
Why not embrace the stereotype in our investing? When even wind
turbines can kill birds (if less so than skyscrapers and pollution from coal
plants) and solar panels are awfully expensive, it can be hard to agree on
the companies or technologies that are truly "green" and which ones
are just greenwashing. Many well-meaning
people make the case that we need nuclear power and/or "Clean
Coal" to fight global warming, but it's hard to get behind a power
source that involves finding someplace underground to store hazardous waste for
centuries or millennia at great expense.
If we can't agree on what we like, at least we can agree on what we
hate. So why not short the companies which do the things we hate?
That's a rhetorical question. Shorting is extremely risky, and should
only be done with a careful eye to risk management. That said, I'm
generally bearish on the outlook of the stock market, so in addition to giving
some simple rules to help people decide to sell what they already
own, here are
some ideas for those of you with courage of your convictions wanting to strike a
blow for what you believe in.
It has been claimed that the biggest step you can take to reduce your carbon
footprint is to eat less meat. Some of these claims may be
exaggerated, but it's certainly true that the way we
currently raise and transport meat, it's extremely energy intensive (not to
mention unhealthy for both the animals and ourselves.)
SHORT IDEA: The rush to ethanol (caused by peak oil) is most likely to harm
the economics of pork and poultry, so the vegan investor might consider
shorting meat products companies such as Tyson Foods (NYSE:TSN),
despite their partnership
with Conoco-Phillips for Green Diesel.
As well as eating vegetarian, ethical eaters also look at the energy
necessary to get their food onto the table, as well as the energy costs of
transporting all those Chinese-made gee-gaws. While the distance of transport
is an extremely poor proxy for the energy needed to get the item there
(containerized shipping is so efficient that we're likely to burn more fuel
driving to the grocery store and back than we're likely to save by buying local
foods while we're there), growing herbs in your own garden is likely to be much
more energy efficient than flying them in from South America... especially if it
saves you a drive to the grocery store for a singe ingredient.
SHORT IDEAS: Investors might consider shorting
country ETFs of highly energy intensive economies with little local energy
is the first country which comes to mind for me, although the thought of
shorting China scares me almost as much as global warming. A safer
anti-globalization short might be airlines (although they seem to be declaring
bankruptcy so fast that we may have missed the plane on this
are also feeling the pinch of high gas prices, so if you, like me, feel that
there's more where that came from, take a look at long-haul truckers.
#3: Urban Sprawl
Urban sprawl is the unwanted child of our ill conceived love affair with the
car, and keeping the brat happy is one of the major factors keeping us
together. The biggest investment many of us will make is a home, so living
near where you work is probably more important than your financial investments.
But that doesn't mean you can't strike a blow against sprawl with your brokerage
SHORT IDEAS: Housing developers who slap 'em up cheap in the suburbs and
exurbs, and the road construction industry.
#2: Coal & Oil Cos.
I personally loathe the coal industry.
Devastation caused by mining adds injury to the insult of massive carbon
emissions. Some oil companies have been making moves towards biofuels, but it's
small potatoes compared to their main business. Nevertheless, I'd stay away from
shorting these two industries no matter how much you hate them... the same
rising energy prices that will benefit clean energy will benefit the old fossil
fuels. Although both will have considerably less to sell as time goes on,
they should be able to command premium prices.
Although I can see a scenario where
massive carbon regulation actually depresses the price of coal, I don't expect
lower coal prices anytime soon.
SHORT IDEA: Don't do it.
#1: Sport Utility Vehicles
I'm convinced that the personal
car will never be green. The most forward thinking car companies, like
Toyota, realize this, and are already starting to plan for a day when the
personal car is obsolete (at least according to a presentation I saw at a recent
conference.) But it's likely to be too little, too late, especially for
companies which seem to believe that an SUV that burns ethanol and gets 22 MPG
is the height of greenery. They may even have to go
head-to-head with Wal-Mart. This is the one short idea here I feel strongly
enough about to actually dabble in. I just took small short positions
(actually far out-of the money January 2010 short calls) in Ford (NYSE:F)
and General Motors (NYSE:GM.)
Admittedly, these companies have many other problems besides peak oil and global
warming, but those are well known, and likely to already be factored in to the
SHORT IDEA: If you've ever been tempted to vandalize an SUV, here's a legal
DISCLOSURE: Tom Konrad has short positions in F, GM.
DISCLAIMER: The information and trades provided here are for
informational purposes only and are not a solicitation to buy or sell any of
these securities. Investing involves substantial risk and you should evaluate
your own risk levels before you make any investment. Past results are not an
indication of future performance. Please take the time to read the full