The Carbon Footprint Myth Is Distracting You From The Real Solution: Green Investing
Reducing your carbon footprint alone isn't enough, you need to enhance your impact with green investing.
Every day, we’re told that the solution to climate change lies in our hands. We’re told to buy electric cars, stop using plastic, recycle, and to reduce our “carbon footprint”. This simple, effective, message has its origins in a 2005 ad campaign from oil producer Beyond Petroleum, better known as BP.
This campaign was built upon decades of effective advertising that spread a simple message: climate change, plastic pollution, smog - It is all your fault.
The thing is, they have a point. We do have personal responsibility to combat climate change. The problem with the prevailing narrative is that cutting back as individuals is not enough.
We need to make an impact that goes beyond our actions, and that’s where green investing comes in.
To understand why green investing is the best way individuals can fight climate change, let’s take a deep dive into the problems with our climate narrative today.
Who Benefits From The Personal Responsibility Narrative?
The earliest example of blaming the consumer can be seen in the, somewhat iconic, 1971 TV ad popularizing the tagline “People Start Pollution, people can stop it”. You’ll find the ad below, take a minute to watch it, it's important.
Like me, you probably feel that even today, this advert hits home. We’re all familiar with the sight of polar bears sifting through garbage to find food, melting ice-caps, and raging forest fires. Every person reading this is probably, rightly, concerned that they are contributing to climate change, and wants to do something about it.
The problem is that individual effort is a drop in the ocean. In 2020 near-global lockdowns should have significantly reduced emissions, but they were just 6.7% down compared to previous years.
Think about that 6.7% figure a moment. Factories, which produce 24.2% of all emissions, were closed. Road transport, which is responsible for 11.9% of all emissions, was largely halted. Many of the most polluting activities simply weren’t happening, so why was the reduction just 6.7%?
The reason primarily comes down to the sectors most affected by the pandemic. Aviation was one of the hardest-hit industries, but it only contributes 1.9% to global emissions. Transport emissions, a much larger polluter, fell by 7.4%, but these are still relatively minor numbers. Major sources of pollution, such as agriculture and residential activity, continued to occur.
What this also demonstrates quite aptly is that while individual action to reduce our carbon footprint, such as not driving, can help, it is simply not enough on its own. There’s too many factors for any of us to make a meaningful impact.
This raises a question. When the climate issue is so complicated, why are we focusing so much on individuals changing their lifestyle?
To get the answer, let’s go back to that ad from earlier, specifically, who bankrolled it.
It was published by the non-profit “Keep America Beautiful”. An organization that just so happens to be funded by beverage and packaging giants such as the Coca-Cola Company or PepsiCo.
The same companies that switched to plastic packaging for the majority of their products.
I wonder what they have to gain from blaming individuals for plastic waste?
This same trend can be seen in our entire climate narrative today. In particular, the term personal carbon footprint. By ensuring that we obsess over small personal changes, and shame our friends and colleagues for not doing the same, the real polluting industries avoid scrutiny.
Why Doesn’t The Government Just… You Know, Fix it.
The big challenge is that governments are actively incentivized to focus on the issues that their donors care about. Yes, they’ll happily talk about reducing climate change emissions in order to get your vote, but their real-world impact has been aptly described by Greta Thurnberg:
The problem, is that government is slow and dominated by the same interest groups that want you to solve the climate crisis. They will happily announce symbolic gestures to combat climate change, such as plastic straw bans, or new fines against minor polluters. However, they lack the political capital or will to push through meaningful change.
Take concrete. This industry is responsible for around 8% of all carbon emissions globally and is the cause of severe loss of habitat in order to meet demand. Given that we know it causes damage the knee-jerk solution is simple: ban concrete.
The problem is Concrete has become a key material for the construction of affordable housing. Of the 15 big concrete pollutors, 11 are developing countries. Any concerted action would cost jobs, lives, and keep the world’s poorest, poor. It’s politically impossible, so government’s decide to ignore it.
This sad reality brings us back to square one, personal responsibility. Buying an electric car or going vegan certainly helps, but it won’t bring the change we need. Instead, individuals need a way to maximize their potential impact.
That’s where we come to the point of this newsletter: Green Investing.
Targeted Green Investing Is The Best Way Individuals Can Fight Climate Change
Let’s say you want to lower your carbon footprint. You decide to sell your old fossil fuel car, and spend $39,990 on buying a new Tesla. You’ll feel good, you will be creating less local emissions, and you will feel like you’re doing your part.
The problem is that you’ve just replaced one car. You’re helping, but your impact is limited to, in the worst case of a coal-fired powergrid, just 0.5 million grams less of C02 emissions a year compared to a gasoline car. To make matters worse, you now own a depreciating asset that will eventually create more electronic waste.
Imagine if you’d have taken that $39,990 and used it to invest in a renewable energy company like First Solar, Inc. (NASDAQ: FSLR), a leading provider of solar panels. If your timing was good, you might even have invested in March of last year, when the company was languishing at lows of $33.69.
Today, that stock would be worth 183% more: $95.60.
Using bar-napkin math, your $39,990 stake is now worth $113,171. You’ve increased your own net worth, enabling you to invest in more green stocks, while helping to support the renewable energy industry.
The problem with this scenario is that many of us don’t have $400 to throw around, let alone just shy of $40,000. So let’s look at something a little more modest:
For argument’s sake let’s say that you’re concerned about the environmental impact of avocado toast and almond milk. You cut-back the $100 a month you’re spending on these products (you decadent creature, you), and decide to invest it into a green index fund instead, for example First Trust NASDAQ Clean Edge Green Energy Index Fund (NADSAQ: QCLN) and a handful of other exchange traded funds (ETFs).
This will bring you less stellar returns, but the power of dollar cost averaging means your investment will steadily grow over time, and you won’t need to worry about market volatility. All while supporting the fight against climate change.
Green Investment Is About More Than Just Renewable Energy
Remember the concrete example from earlier? Climate change is an enormously complicated issue. Almost all aspects of modern society contribute to climate change, however if you search for “green investments” you will see a list of green energy ETFs and electric vehicle companies.
This means that companies focusing on emerging or niche technologies are often overlooked by investors and the media who don’t understand climate change. Take the example of air conditioning.
With rising temperatures, air conditioning could account for between 20-40% of world’s remaining “carbon-budget” by 2050. This makes alternative cooling solutions, or at least more efficient air conditioning systems, a key target for green investors.
However, this topic is barely touched by mainstream business news. For instance, investing in companies that are actively improving the efficiency of their air conditioning units such as Carrier Global (NYSE: CARR) could have a huge impact. The more risk tolerant among you might even consider looking at Special Purpose Acquisition Vehicles (SPACs) or Initial Public Officerings (IPOs) that focus on up and coming companies.
There’s just one problem, researching all of this and coming to the right decision takes time. That is where I come in.
Get Deep Dive Analytics On Overlooked Market Segments
I firmly believe that the best way we can maximize our impact is by targeted investments into overlooked market segments.
So each week, I will pick a new aspect of climate change to tackle, and help you understand the kinds of companies that you need to be looking at in order to start your green investment journey.
The best part? It’s free!
But I Don’t Even Know What ETF Stands For! How Can I invest?
It stands for Exchange Traded Fund, and with a little patience anybody can, and should, invest a little money every month. A 25-year-old who invests $100 a month in a Roth IRA (or local equivalent) for 40 years could retire with an investment worth just over $1 million, assuming average annual returns of 12%.
However, investing is confusing. The space is filled with acronyms, deliberately obtuse language, and a lot of caveats. So, I will also be releasing a series of newsletters that explain one aspect of investing in a green context every week, so you can learn as you go!
Take REAL Personal Responsibility and Leverage Your Investments For Positive Impact
Like you, I have spent the last few years watching in despair as our governments do nothing to fight climate change. I have felt that deep, dark onset of despair as I read about how we are coming closer to the tipping point.
That changed when I invested in my first green stock. I finally felt like I was doing something that might make a real difference, and I am here to help others do the same.
Every week I will deliver green investing insight straight to your inbox, and as an added bonus I’ll include explanations about ETFs, SPACs, IPOs, and all those other confusing acronyms.
What are you waiting for? We all have a moral duty to fight climate change any way we can, so put your money where your mouth is, and start building a green portfolio today.
Disclaimer: All material presented in this newsletter is not to be regarded as investment advice, but for general informational purposes only. Investing does involve risk, so caution must always be utilized. We cannot guarantee profits or protection from loss. You assume the entire cost and risk of any trading you choose to undertake. You are solely responsible for making your own investment decisions. Owners of this newsletter, its representatives, its principals, its moderators, and its members, are NOT registered as securities broker-dealers or investment advisors either with the U.S. Securities and Exchange Commission or with any securities regulatory authority. We recommend consulting with a registered investment advisor, broker-dealer, and/or financial advisor. If you choose to invest with or without seeking advice from such an advisor or entity, then any consequences resulting from your investments are your sole responsibility. Reading and using this newsletter or using our content on the web/server, you are indicating your consent and agreement to our disclaimer.