Things are Changin’

Lately, we have been thinking about energy. Specifically, how energy policies are shaping the global environment. Where do we see supply and demand dislocations? What trends are taking hold? And, most importantly, how are we going to make money from these changes?

All of these questions are tied to our end result: achieving outsized returns by anticipating capital flows. Currently, there is a massive movement happening right in front of us in the energy space, without little proper investment outlet, that is climate change.

Recently, Chris discussed rising energy prices in Germany and the potential implication of new green policies in the article “German Energy Policy – A Page Out Of Crazy!”. I’m not going to further explain the implications of such policies or discuss whether or not they are a good idea.

Instead, I’d like to point out the obvious – the push towards a cleaner environment is happening whether you like it or not. Irrespective of whether you are a climate denier or a green activist, I think we can all agree that our earth is a pretty nice place and it’s our responsibility to keep it as comfortable as possible.  

Also, whatever your beliefs are regarding the degree to which greenhouse gasses are warming our planet, I think we can all agree that:

  1. Governments are aggressively implementing policies to reduce carbon emissions; and
  2. We like money and would like to position our portfolios to make more of it.

The Trend: Activist Policy Change

EU To End All Fossil Fuel Lending In Two years

By the end of 2021, the European Investment Bank, the EU’s lending arm, will stop all lending to “fossil fuels”. The bank previously quit lending to the coal industry in 2013, but now has the oil and gas industry in the crosshairs and they appear to be pulling the trigger.  

Across the pond in the U.S., things are progressing on a more granular level as government policies invade personal property decisions.  

No more fire in the kitchen: Cities are banning natural gas in homes to save the planet

This may not seem like that big of an issue to many, as it is estimated that roughly 35% of U.S. households have a gas stove, while 55% have electric. But when government policy – not price, dictates what Americans are and are not allowed to do, it is a big deal.

This indicates to me that people feel so strongly about the movement that they are willing to sacrifice individual freedoms, however small, to promote a cleaner climate.

There are many, shall we say, “enthused” activists out there like these guys:

Now, it’s important to remember that you do not necessarily have to act like an asshole to also want a cleaner environment.

Some things are not Left or Right, nor Black or White

Why Apocalyptic Claims About Climate Change Are Wrong

Do not worry, there are still many people out there, people like you, that have not lost their mind, but rather choose to observe science and think about things rationally.

Scientists, who believe that greenhouse gasses are affecting the environment to a substantial degree, are out there denouncing much of the catastrophizing rhetoric surrounding the topic.

So no, climate change will not be the cause of the world ending in 12 years, it’s unlikely to start a massive genocide, unstoppable forest fires, famine, or an apocalyptic scenario. This kind of catastrophizing is a real problem; studies indicate that extreme rhetoric has incited anxiety in children around the world who are increasingly concerned about their own future.

“All these young people have been misinformed. And partly, it’s Greta Thunberg’s fault. Not deliberately. But she’s wrong.” – Australian climate scientist Tom Wigley

Similar opinions are being voiced by climate scientists who have spent careers researching and fighting climate change. They believe addressing climate change is important, but also believe that false claims about the effects it is causing on the world undermine the argument.

The extreme rhetoric is also making the political agreement on climate change harder.

To disagree with extreme rhetoric doesn’t make you a climate denier; there is plenty of middle ground between climate apocalypse and climate denial.

Making Money: How to Take Advantage

A shift in the world’s energy production, away from fossil fuels, has many effects, but few people understand how to take advantage of this transition. Just last week, Jamie was at an event where a speech was given about climate change. After the speech, someone stood up and asked how they should invest to not only be green but also to make money…. And well, the speaker stumbled over their words and had no actionable answer for the crowd.

Fortunately, we understand how to think about and take advantage of these trends.

For example, if all gas stoves are outlawed, what does that mean?

It means construction and lots of it. Natural gas lines will have to be replaced, stoves reinstalled, and much more . 

Now, you might take this to mean that I want to invest in construction companies. But no, that is too much work and too much risk. How would I know which companies will be hired? Are they public? Etc.  

The common denominator here is materials. All of this talk means that the world will need to replace infrastructure, and new infrastructure means more materials.

Materials, my friends, come from mining.

What we do know about is natural resources. Natural resources are not just battery metals or oil and gas, but everything in between. Timber, cementitious material (to make concrete), copper, nickel, iron, etc.

Just another reason why we focus solely on finding the best natural resource investments through our exclusive service, Resource Insider.

Things are changin’. Make sure your portfolio is, too.

– Nick


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