At a time when we are seeing a rapid rise in the price of commodities and in particular oil, is it time to increase our investments in green technology and the wider concept of sustainability? Undoubtedly the recent unrest in Egypt and the Middle East has affected the price of crude oil, with commentators worried about supply disruption and the continued operation of the Suez Canal, which allows the transportation of millions of barrels of oil a year. The end of last week saw benchmark Brent crude oil once again hitting the $100 a barrel mark [1]. Along with the rise in oil prices, we are also witnessing a rapid rise in the price of food across the world. Figures from the United Nations show prices at a record high and, in particular, cereals have risen by 3% since December 2010 [2].
Whilst such rises in the price of commodities, along with a potential rise in interest rates, are worrying, with some commemorators speculating that this could jeopardise Britain’s financial recovery [1], could it provide the catalyst for much-needed long-term investment in the environment? Nick Clegg has emphasised the importance of green growth as part of Britain’s economic strategy, saying, “We are determined to foster a new model of economic growth, and a new economy – one built on enterprise and investment, not unsustainable debt” [3]. The rise in the price of oil has increased the appeal of investing in alternative energy and this may be the time for investors to buy while valuations are still low [4]. In 2007 when oil prices last rocketed to over $100 a barrel, there was a boom in alternative energy stocks and NASDAQ is stating that green investments were up 6% in the first few weeks of 2011 [5]. From these figures, it would appear that investment in solar technologies can be profitable, with some giving triple digit returns, including 300% in JA Solar [5].
It would appear that even the biggest greenhouse gas producer and energy user, China, is investing in a green strategy, indicating that no-one, however big a fossil fuel consumer, wants to be totally reliant on such a volatile market. March will see the release of a 5-year economic plan that is being hailed as their greenest yet [6]. How “green” the strategy actually is, we will have to wait to see, but there are some indications that it will be a promising move. There is the possibility of an environmental tax, and even a cap on energy use [6]. China is still a country that is seen as developing in large parts, so the introduction of a ‘green strategy’ is hugely encouraging and will hopefully provide the lead for other such countries.
Therefore are we witnessing a true change in the course of green investment? Countries which were once seen as the greatest polluters with the softest of environmental stances are acknowledging that their economies need to be built on something stronger than the fluctuating value of fossil fuels. Since the second half of 2010, green investment has been growing and investors are predicting a strong 2011 [5]. As with any investment, some will do better than others, but what is certain is that for any would be green investor, there are exciting times ahead. Potential investors should be aware that prices can fall as well as rise and should always take appropriate financial advice before investing.
References
[1] Businesses warn interest rate rise run risks of derailing recovery (2011). Heather Stewart, The Observer [Online]. Available from: http://www.guardian.co.uk/business/2011/feb/06/bank-of-england-interest-rates?INTCMP=SRCH
[2] Agrimoney.com (2011) [Online]. Available from http://www.agrimoney.com/news/wheat-prices-at-risk-of-spike-barcap-says–2787.html
[3] Nick Clegg: there is no magic lever for economic growth (2011). Patrick Wintour, The Guardian [Online]. Available from: http://www.guardian.co.uk/politics/2011/feb/04/nick-clegg-no-magic-economic-growth?INTCMP=SRCH
[4] The Week (26th January 2011), Issue 802.
[5] NASDAQ (2011), The Top 10 Green Investments for 2011, [Online]. Available from http://community.nasdaq.com/News/2011-02/the-top-10-green-investments-for-2011.aspx?storyid=55775
[6] China plots course for green growth amid a boom built on dirty industry (2011), Jonathon Watts. The Guardian, [Online], Available from: http://www.guardian.co.uk/world/2011/feb/04/china-green-growth-boom-industry?INTCMP=SRCH
