Green Investing

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iopsi
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Green Investing

Post by iopsi » Sun Jan 06, 2019 5:19 pm

What do you think about investing only in green and at worst in (theoretically) carbon-neutral companies? If we can vote with our dollars through consumption (or lack thereof), we can do it also through investing.
By not spending (much) we help our pockets and the environment, by putting those money on (profitable) clean tech stocks we also help our pockets (and eventually buy our freedom), partially help the environment and help create a more sustainable/durable advanced economy (which is what allows us to reach the level of economic freedom that lets us not work for survival ever again after a certain capital is accumulated). This "closes the loop" in the sense that by looking for our interest (economic freedom) we strengthen the system that makes our interest easier to achieve. It is self-reinforcing.

Seems like a scalable and robust choice to make (as jacob would say), infact the more people do it the better it is for everybody (both from an ecological and an economical perspective). The same can't be said for all types of investment choices imo.

What are your thoughts?

jacob
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Re: Green Investing

Post by jacob » Sun Jan 06, 2019 5:40 pm

There are a bunch of energy companies now that are either strictly or 90%+ alternative energy.

However, while I hold some of them, my focus is more to avoid those companies that are strictly not-green. This can be done for purely financial reasons. At some point, the market will realize that such companies rely on resources or technologies that are imputed or obsolete. At that point the future cash flows that such companies were otherwise trading on will valued at zero and the market value will adjust accordingly.

Germany's nuclear industry is an example. The US coal (the worst fuel available---there's very little rational reason to pursue this resource/technology anymore) industry is another example. What you're looking for are energy sources whose EROEI or energy returned on CO2 emitted (highest pollution intensity) are the most marginal because they will be the first ones to go as new technology and mitigation regulations are introduced. Avoid those.

Energy is a tricky thing to invest in because the oil companies are determined to set the price so they can extract the maximum of their reserves now that they are in direct competition with unsubsidized alternatives. The price is set accordingly (fracking operations become profitable around $75/bbl in the current economy and IIRC solar is about the same). The reason we're in a range of high volatility now is that it takes too long to start up and shut down fracking operations so the market feedback is [too] delayed to maintain price stability. Fortunately, some lessons have already been learned the hard way and interest rates are going up, so that should put a damper on the techno-optimism.

Ultimately, expect power generation to be quite decentralized (PV panels on individual roofs). IOW, power generation is something that will change a lot over the next several decades. Any breakthrough in battery technology or simply scaled production (similar to what China did/does for PV) will change things materially. Keep an eye on the giga-factory.

Keep in mind that given how we've currently in an overshot condition that will be corrected sometime near the mid-end of this century, helping the environment AND helping your pocket is not a thing. They're contradictory outcomes. It's now a negative-sum game where the main goal is to lose least.

arcyallen
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Re: Green Investing

Post by arcyallen » Mon Jan 07, 2019 4:10 am

I think it's a nice idea from an investment standpoint, but it pretty much ends there. Let me start off by saying it's a noble idea - only buying companies that you'd be proud to own. That might be Tesla, Remington, or whatever. Sharing their beliefs, for some people, is critical. For me it's a consideration, but not a requirement.

The only problem you run into is that as soon as you use a non-financial filter (like is it Environmentally Responsible) to decide which companies to buy you're taking a performance hit by default. Either you're going to buy the companies that you think will make the most money, or you'll only buy the ones that behaviorally do "x", or avoid "y". As Jacob said these two things -could- be interconnected, but you could also just remove the feel good portion of the filter and instead ask "Will this company make more money in the future?". Look at a 20 year record for a socially responsible mutual fund (from, say Calvert) and compare it to the "average" fund and you'll find they most likely will lag financially (while possibly promoting your values).

I think it comes down to priorities in investing: Either you're going to invest in what you think will perform the best financially, or ones that share your values. The two might have a little overlap, but but with a zillion companies existing and only a handful that would likely pass an honest filter it's going to be a tough outcome.

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vexed87
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Re: Green Investing

Post by vexed87 » Mon Jan 07, 2019 5:20 am

If you want feel good factor, you might want to try investing in local community resilience, trouble is, it's hard to quantify your returns as they are not always returned to you in financial capital. Looking a bit further out localised energy production will be essential. Have you made plans for your own decentralised energy system for example? Perhaps you could export energy to your neighbours. It will be good to be needed when the grid begins to falter. It's hard to entertain such ideas when we are so invested in globalised energy markets, but it may pay off big in the future.

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Re: Green Investing

Post by jacob » Mon Jan 07, 2019 8:48 am

To add further ... the best green investing is the kind that makes your household sustainable. Not only does this eliminate contributing further to the problem (by definition), it's also easier to do now while energy is still cheap and time is on your side. This makes it possible to proceed in good order rather than dealing with bottleneck reaction times.

Things to do/change before before the transition is forced down the line...
  • Your own health. A climate adaption gets increasingly more expensive, expect less money to be spent on geriatric care because priorities. Avoid lifestyle diseases. Pay if you have to.
  • Decentralized energy sources. Solar for heating and electricity. Insulating the walls. Flood control if necessary. Battery backed up A/C if you live in a deadly heatwave zone.
  • Possibly relocating out of ground-zero sites like flood zones, wildfire areas, hurricane counties, black flag regions,...
  • Eliminating plastic. It's bad and it won't always be here.
  • Living on less than $12,000/person/year (the sustainable limit) in 2018 dollars with the 2018 population.
This will have much more direct impact on both yourself and the market (consumer demand) than any green-inspired portfolio adjustments (investor supply) in the secondary market.

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vexed87
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Re: Green Investing

Post by vexed87 » Mon Jan 07, 2019 11:31 am

In a similar vein, low-tech approaches are often the best in terms of sustainability, which is great, because they are generally cheap. If you are trying to replicate energy intensive lifestyles in an off-grid fashion you are probably not being very green, in fact, you may increase your own CO2 footprint compared to a grid-connected household, but that depends very much on the supply and usage. A shift to renewables usually requires a substantial downshift in energy habits before it makes sense.

Some other things to think about:
How will you light your home when your solar PV system breaks down and parts cannot be sourced?
How will you heat in the winter/keep cool in the summer?
How will you store and cook food once your fridge and indoor gas stove stops receiving energy supply?
Where will your waste go?
Is the soil in your garden suitable for horticulture? What grows there?
Where will your drinking water come from?

Lean Logic: A Dictionary for the Future and How to Survive It is an excellent eye-opener if you care about this stuff. Sorry, I feel like I am constantly plugging this book, but it's awesome! :lol:

A sustainable economy has to be localised, and low tech, which is the main topic of the book. Investing in green corporations is all well and good so long as the market is functioning, though how long it will go on for is anybodies guess!

iopsi
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Re: Green Investing

Post by iopsi » Mon Jan 07, 2019 2:32 pm

jacob wrote:
Sun Jan 06, 2019 5:40 pm
However, while I hold some of them, my focus is more to avoid those companies that are strictly not-green. This can be done for purely financial reasons. At some point, the market will realize that such companies rely on resources or technologies that are imputed or obsolete. At that point the future cash flows that such companies were otherwise trading on will valued at zero and the market value will adjust accordingly.
Yes exactly, it's not only a problem about "feeling good" (even tho trying to do the "ethical" thing plays a part ofc), but also about the cash flows of those carbon-heavy companies (and whole industries). Sooner or later, whether it is by the government or the market, they wont be able to externalize costs as much as they do now, which means they wont be able to provide the cash flows that investors hope to receive.

There was a research about how, if the externalized costs where included, most carbon-heavy industries wont even be profitable. I haven't read it tbh, but if it is even half accurate, then investing on those industries (especially coal and animal farming) is like investing in very overvalued companies/sectors.

Anyway i'm not sure that energy production will become more decentralized... i mean, as far as i understand, it's not trivial to set up an off grid house and the infrastructure for electric transportation is already there.. seems to me that most people would be too lazy to do it. Unless it becomes the only option for having electricity i guess.

I agree that energy usage will probably go down drastically (much less EROEI than fossil fuels, therefore more expensive), but at the same time couldn't that energy still be produced by big companies more efficiently than by locals? And if so this makes me think that people who are invested in those companies will continue to collect dividends.

Clearly that won't be possible if there will be an almost total break down of the current technological infrastructure and economy.. but i'm not too convinced that it will happen (not on that scale at least).

It would be interesting to calculate whether buying solar panels for your own energy would "make more money" than buying shares of a solar corporation. Intuitively the former would probably have higher ROI as long as it is done to cover one's energy needs, but the latter would probably be better than selling energy with excess panels.

Also i agree with your second post, but i'm already health conscious, very frugal overall and have an house in the countryside (tho i don't live in it right now) which should be safe from most environmental hazards. A stable and passive source of money on top of that would be the icing on the cake.
arcyallen wrote:
Mon Jan 07, 2019 4:10 am
I think it comes down to priorities in investing: Either you're going to invest in what you think will perform the best financially, or ones that share your values. The two might have a little overlap, but but with a zillion companies existing and only a handful that would likely pass an honest filter it's going to be a tough outcome.
Yeah but that's the thing, i think environmental friendly companies are in reality more profitable than non-friendly ones. Because they should be able to provide cash flow for a longer time than their counter parts.
Carbon-heavy companies are overvalued because they produce huge costs that, if included in their balance sheets, wouldn't make them profitable (or would severely diminish profitability).
Sooner or later, in some way, there will be a correction.

vexed87 wrote:
Mon Jan 07, 2019 5:20 am
If you want feel good factor, you might want to try investing in local community resilience, trouble is, it's hard to quantify your returns as they are not always returned to you in financial capital. Looking a bit further out localised energy production will be essential. Have you made plans for your own decentralised energy system for example? Perhaps you could export energy to your neighbours. It will be good to be needed when the grid begins to falter. It's hard to entertain such ideas when we are so invested in globalised energy markets, but it may pay off big in the future.
Well i haven't taken any major steps towards self-sufficiency for now (if you exclude using the bike as a transportation instead of a car, and generally being very frugal). But being energy self sufficient is something that i'll like to be in the not too far future (right now i can't plan anything in particular cause i'm not living in an house that i own). I've also thought about food (have a bunch of books about biointensive agriculture and some ebooks about permaculture).

Gonna check the book that you suggested.

Still, i'm not as "pessimistic" as many of this forum. There will probably be a general degrowth of the economy (lower EROEI etc), but what stops renewable energy corporations from gradually expanding and partially taking the place of fossil fuels?

I'm interested in sustainable self-sufficiencty, but also on a (passive) secure stream of cash.

daylen
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Re: Green Investing

Post by daylen » Mon Jan 07, 2019 5:22 pm

iopsi wrote:
Mon Jan 07, 2019 2:32 pm
Still, i'm not as "pessimistic" as many of this forum. There will probably be a general degrowth of the economy (lower EROEI etc), but what stops renewable energy corporations from gradually expanding and partially taking the place of fossil fuels?.
Lack of electrical-energy mobility(*) and variation in renewable energy production across spacetime.

The overshoot is beyond just energy. Resources are not evenly distributed and transporting resources across the globe is non-trivial. The road network, rare metal mines, labor, water, food, and so forth are all tightly coupled right now.

(*) Battery technology is a source of uncertainty, but it is still highly dependent on oil and the transportation infrastructure.

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Re: Green Investing

Post by jacob » Mon Jan 07, 2019 5:45 pm

The other problem is that alternative energy is built on top of an infrastructure that was built using high EROEI fuels. Currently the strategy is just to avoid paying for maintenance. This suggests EROEI for alternatives (more recent inventions) is lower than it appears. If so, it may not be affordable (in terms of multiple inputs) to sustain the technological infrastructure at the level that is required for the highest efficiency technologies (advanced PV). If this is the case, then all renewable energies are doing is to buy civilization a bunch of additional decades by extending the overshot.

slsdly
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Re: Green Investing

Post by slsdly » Mon Jan 07, 2019 6:10 pm

Jacob, how do you feel about hydro power? I can certainly think of more plants that are remote than near the urban centres in Canada...

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TheWanderingScholar
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Re: Green Investing

Post by TheWanderingScholar » Thu Jan 10, 2019 7:11 pm

@jacob:
Would buying a few more decades for civilization be a good idea to allow the human population to decline towards a more sustainable level,and allow economic growth to less developed countries to become more energy secure using localized green techniques.

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Re: Green Investing

Post by jacob » Thu Jan 10, 2019 7:26 pm

@slsdly - I would look at how those plants are fed? Snow melt? Consider exporting the water for drinking instead.

@TWS - There are a lot of unspecified optimization goals in that question. Good for whom?

The short answer is that if humanity will spend those decades stabilizing its population (that means having far fewer children---current birth rates are ~twice the death rates => needs to decrease below half because of demographic inertia), it's a good idea (in terms of general/average well being); if not, it's a terrible idea as it will allow the economy to grow much larger until it is overwhelmed by pollution and loss of agricultural productivity (soil erosion).---This will solve the population issue the natural way (<- the form of the increasing death rates are hinted at there) and probably rather quickly too.

iopsi
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Re: Green Investing

Post by iopsi » Fri Jan 11, 2019 8:08 am

Also what about nuclear power? That's something that usually gets glossed over in these kind of discussions. I've read on a wikipedia page (can't find it, damn) that a molten salt reactor that uses thorium has very big eroei. It is also very safe, has lower upfront costs and the fuel is abundant (compared to other reactors). Tho not sure if there is a catch (need to do more research).
And we already have an example of a developed country powered almost entirely by nuclear (i.e France), it is generally a very reliable source of energy.

We could also talk about fusion but that is still an hypothetical (and there isn't the time to wait for it and mass produce reactors i suppose).

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Re: Green Investing

Post by jacob » Fri Jan 11, 2019 12:16 pm

I think the only catch is that thorium has never been exploited commercially. (Oh, also, the fuel is extremely radioactive, but that might be a good thing since it makes it harder to steal.) Test-reactors have been built and there are some startups looking into it. I don't know what the EROEI is for thorium and obviously it depends on mineral concentrations. It's supposed to be 3-4 times more abundant than uranium. That's not much---the only reason that uranium has high R/P values (several decades) is that nuclear power is ~10-15% of the energy supply.

=> It's hard to invest in thorium because it doesn't exist commercially.

It's easy to invest in uranium (NYSE:EXC). Basically, you'd be buying existing reactors (new ones aren't really being built) and the money stream that comes from selling grid electricity. Since fuel is cheap, they are never switched off. Note that nukes don't tend to be great investments w/o subsidies. Several operators have gone bankrupt.

The matter of the waste problem is probably why it gets tuned out from sustainable discussions.
The external costs are pushed and paid for many thousands of years into the future.

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TheWanderingScholar
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Re: Green Investing

Post by TheWanderingScholar » Fri Jan 11, 2019 11:17 pm

@jacob:
Obviously for population to decline. I mean currently India, projected to be largest country population wise now around 2.33 fertility and as it economical develops overtime, the tendency of birthrate's to decline increases. This means that India will eventually decline in population.

With China also looking to peak soon means that two major countries contributing to population growth are currently nearing their apex and decline in the future.

However an issue that will come is the issue of population growth in sub-Saharan Africa which can prevented increase female rights, economic opportunity, and other metrics which can help the population growth decline and stabilize in the region.

That being said food supply is under duress in certain regions such as China [1], meaning that the possibility of large increases in death is possible.

[1]https://www.reuters.com/article/us-chin ... SKCN1P10W3

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