My long-term investments are focused on high-growth sectors. To identify them, I first look at broad themes with great growth opportunities. One of these is clean energy, which brings green stocks in focus. We have always been aware of climate change’s dangers. And while there have been efforts in the past to check such activity, they are now accelerating like never before.
Green policy push
Biden’s election win has been the biggest recent catalyst. His campaign had the environment on the agenda. And since becoming president, he has pushed for massive infrastructure investments. These include green projects like electric vehicles and renewable energy.
The UK government too, has a 10-point plan for what it calls the “Green Industrial Revolution”. This includes offshore wind capability development. It also includes supporting growth of low carbon hydrogen production to replace fossil fuels. And it aims at accelerating the shift to electric vehicles.
Technology development enables push forward
Increasing technology advancements have also made the forward push possible. This is because green energy is now more cost effective because of them. EVs, for instance, according to insurance company Direct Line, are now cheaper to own than cars that run on fossil fuels.
Tesla‘s success has also encouraged other automotive companies. Big auto makers have ventured into EVs. And new EV companies have mushroomed. Along with this, companies supporting the EV ecosystem have also come up.
How the FTSE 100 index is getting green
FTSE 100 companies, too, have are leaning towards clean energy now. For instance, energy utilities like National Grid and SSE are now making forays into renewable energy. This is true for traditional oil biggies like BP and Royal Dutch Shell too.
Emission control systems’ provider Johnson Matthey is developing materials for EV batteries. Its first commercial plant for the same is underway. It is also in the process of producing a natural gas substitute from hydrogen, which is also mentioned in the UK government’s plan for a green economy. Australian mining biggie Rio Tinto also made lithium finds in the US. This too finds use in EV batteries.
Besides FTSE 100 stocks, the UK’s stock markets also have listed pure play green stocks like The Renewables Infrastructure Fund and Greencoat UK Wind, both of which focus on wind energy.
My takeaway for green stocks
In a nutshell, green stocks look like they have a great future ahead. Not only does the green energy sector have huge funding at its disposal now, which will push it forward over the next decade, big companies from utilities to miners are growing green segments of their businesses too. I also have the option of buying pure green stocks as well.
There will of course be hits and misses along the way. It is still relatively early days for the industry compared to the high level of future adoption envisaged. So there is some risk involved. But on the whole, I think this is a great time to buy green stocks or stocks that are getting into green business. I will be looking to add to green to my portfolio.