Best stock to invest in – Sustainable Investment Opportunity In 2017



Best stock to invest in

by Garvin Jabusch

Lord Nicholas Stern recently
said
, “Strong investment in sustainable
infrastructure—that’s the growth story of the future. This will
set off innovation, discovery, much more creative ways of doing
things. This is the story of growth, which is the only one
available because any attempt at high-carbon growth would
self-destruct
[emphasis added].” More pointedly, the
Investment Bank division at Morgan Stanley in 2016 advised clients
that long-term investment in fossil fuels may be a bad financial
decision, writing,
“Investors cannot assume economic growth will continue to rely
heavily on an energy sector powered predominantly by fossil
fuels.”

What both Lord Stern and Morgan Stanley understand is that the
world has changed and our approaches to investment need to change
with it. This is at the heart of what I do working in Next
Economics and Next Economy Portfolio Theory.

In thinking about Next Economics and investing, then, it’s worth
asking two questions. ”What will the world’s economy look like in
10 and 20 years?” And,” What would I like it to look like by
then?”

Our answers should, at a high level, inform where we invest. In
arriving at a well-informed thesis hinged on the economy’s ongoing
evolution—rather than on the economy of the past—we can position
ourselves to take advantage of high-growth areas, and we can have
the effect of advancing a far more efficient economy, one with a
better chance of thriving indefinitely. As a pop star once
wrote
(not the one who won a Nobel Prize), “If it’s a future
world we fear, we have tomorrow’s seeds right here.”

Every year since founding Green Alpha, we’ve observed innovations
emerge and compound like a fast-rolling snowball. Each innovation,
improvement, and tool in the economy is smarter than the last and
is immediately put to work in the development of a new generation
of smart tools, evidently ad infinitum. I’d write a book
with a title like Special Topics in Next Economics 2017,
but the pace of innovation is so fast that it would be out of date
before I could get it done. Still, there are a few trends that I
think merit our attention, and our optimism.


Renewable energies.

They’re cheap and getting cheaper. In 2016, we saw the price of solar-generated
electricity fall below
that of wind
, making it the least expensive source of power
generation available, half
the price
of new coal. Wind and solar, being tech-based (as
opposed to commodity-based), will continue getting cheaper, and
will generate more and more of the world’s energy until they
ultimately have most of the energy market share. At some point,
markets will understand
solar
for what it is and begin to value
it
appropriately.
Companies like First Solar, Inc., and Canadian
Solar Inc.
are leading the transition in world energy,
and if they continue to work on innovation, growth, and
maintaining strong fundamentals, they could find themselves among
the world’s leading power companies.

Is renewable energy adoption at scale for real? President Obama
just wrote about the “irreversible momentum of clean energy” in
Science
, and many of the world’s
largest companies are
on the same page, working toward
running all operations on wind and solar. The poster firm for this
is Google
Alphabet, which says it will hit
its goal of 100%
renewable power for all operations this
year. The company is a huge consumer of power, and its transition
to wind and solar is resulting in large emissions cuts for the
economy, as well as business stability and cost controls for their
business. Cities are getting in on this, too, with San
Francisco
, San
Diego
and others
planning to run entirely on renewables by 2035 or sooner. What
about arguments that solar makes electricity rates go up? Well, in
some places that use the most solar, the opposite is happening,
and utility customers are seeing rates
fall
.

Inevitably, all this adds up to jobs in renewables. Though
coal jobs were a focus of the 2016 presidential election,
renewables are where more paychecks are. Wind power supports
88,000 jobs, while close to 373,807
U.S. workers are currently employed in solar
, a 25% rise in
2016—and that number is predicted to rise
to 420,000 workers
by 2020. Wind power employs
101,738 workers, a 32% increase over 2015. As of October,
coal employed fewer than 54,000, according
to the Bureau of Labor Statistics
. It has been surprising to
many observers, like
Jigar Shah
, that these remarkable economic changes don’t yet
get more recognition.

Across the country, wind power has become
the “new corn
” for Red State farmers, providing a steady
source of income in low-income, rural areas. In fact, the 10
congressional districts that produce the
most wind energy are represented by Republicans
.  
California
and other states, meanwhile, vow to push ahead in the fight
against climate change—with or without President Trump’s blessing.

China is doing more to develop and install
renewable energies than any nation. Already the world leader in
wind and solar capacity, China now says it will “plow $361B into
renewable power generation by 2020, and create more than 13
million jobs” (via
Reuters
), leaving
the U.S. in the dust
. According to The
Guardian
, “China now owns five of the world’s six
largest solar-module manufacturing firms and the largest
wind-turbine manufacturer.” It’s also far and away the world’s
leader in electric vehicle production
and sales. Also, China
is spending over $500
billion to expand high-speed rail
. Its war on pollution and
commitments to mitigating global warming are real, and China
clearly is happy (and even excited) to accept
the leadership
mantle in sustainable economics, a title many
perceive the U.S. has abdicated. Having taken the reins on
renewable energy and technology leadership, China is now shoring
up the case for its moral leadership as well, made apparent by
Beijing’s recent announcement that it will now ban all
imports of ivory
.

Renewable energyadoption,
transportation, storage.

What about renewable energy adoption, plus zero-emissions
transportation, plus energy storage? Well, Tesla.
I don’t mention this company particularly as a stock
recommendation but rather as a primary catalyst and the firm at
the nexus of the Next Economy. It’s close to impossible to
overestimate Tesla’s importance. Tesla re-introduced, made sexy,
and popularized electric cars at a time when major automakers and
oil companies were trying to prevent that from ever happening.
Tesla’s ambitious approach to battery storage for cars and
renewable energy has resulted in their Gigafactory,
capable of doubling the world’s current annual output of
lithium-ion batteries and lowering costs commensurately. Don’t
think storage is a particularly big deal? Consider just one
example: After the massive Porter Ranch natural gas leak, the City
of Los Angeles decided to invest in battery backup for its
electricity supply instead of gas, and has
hired Tesla
to provide some systems. LA has been among the
first big cities to make this move, but then, it was among the
first to be bitten by the risks of overreliance on a fossil fuels.

What of Tesla’s and others’ plan to scale up mass-market electric
cars? Will that become huge or remain niche?  Consider these
developments: Germany, Holland, and Norway have all taken steps to
ban internal combustion engine-driven passenger vehicles between
2025 and 2030; more major economies surely will follow. India, for
example, is now considering a similar move. Yes, these are ambitious
goals
that could easily be missed, but even if these nations
get only halfway to their targets, it is not only incredibly
bullish for any carmaker selling electric vehicles but also
bearish for oil, since ground transportation is its primary source
of demand.

Farming.

A New Yorker article said
it best
, “Vertical farming can allow former cropland to go
back to nature and reverse the plundering of the earth.” Vertical
farms are revolutionary for a number of reasons:

  • They uses a fraction of the water required for traditional
    farming,
  • They’re close to or within urban centers meaning no need for
    long-haul transport,
  • Their indoor location eliminates need for pesticides and
    herbicides, thereby mitigating multiple systemic risks (e.g.,
    ocean pollution from agricultural runoff),
  • They can be maintained at a lower cost than conventional
    farming,
  • And they’re more resilient to climate change.

No question, vertical farming is what’s next. Business
Insider
has posted a nifty
photo essay
of an indoor farm in Brooklyn if you’re
interested in how it looks.

Additional key areas…

Computing power. It’s becoming so massive that
our collective ability to assimilate data is now and will
increasingly be unprecedented. The question will become, what
can we do with this amazing
ability?  And let us not
forget the key related areas of cybersecurity and fast-emerging
artificial intelligence and robotics, all of which are ushering in
an era of heretofore unimagined economic efficiencies. What about
the Internet of Things? After a slow start, it
is coming
into its own
: “The falling cost of sensors and connectivity
means the internet of things is finally a reality.” Lots of
opportunity there. In medicine? Don’t get me
started on CRISPR-Cas9,
a technique to edit genomes, thus opening up endless possibilities
in medicine and biology, with equally endless humanitarian,
ecological, and commercial applications.

Okay, enough. We’re overwhelmed with innovations and breakthrough
after breakthrough. We get it. For those of us trying to
assimilate these changes and find the best path forward, the most
important point is this: It’s in seeing the world for
what it is becoming and not for what it was
that investors and markets are going to allocate capital to
manage risks and profit from new opportunities
. This
all leads, not incidentally, in the opposite direction from fossil
fuels.

It is funny and yet poignant that some astrophysicists classify
we humans as constituting merely a Level
Zero Civilization
, with nearly infinite scientific and
technological prowess yet to be realized. Well, I’m not qualified
to evaluate that theory, but what I do know is that so
much progress is being made in so many areas, that I wake up every
day excited to think about the world anew and uncover its
opportunities.

An earlier version of this
post originally appeared
on worth.com.

Garvin Jabusch is cofounder and chief investment officer
of 
Green
Alpha® Advisors
, LLC. He is co-manager of the Shelton

Green Alpha Fund (NEXTX),
of the 
Green Alpha Next Economy Index, the Green
Alpha Growth & Income Portfolio, and of the 
Sierra Club Green Alpha Portfolio. He
also authors the Sierra Club’s green economics blog, 
Green Alpha’s Next
Economy
.”

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