A week into 2022, there is no shortage of uncertainty hanging over financial markets and the global economy.
But one thing is abundantly clear – tackling climate change is the biggest business opportunity in town.
The much-hyped United Nations climate change summit in Glasgow in November last year may not have been the turning point moment for humanity that green advocates had hoped for.
Championing change: Climate activist Greta Thunberg. Tackling climate change is the biggest business opportunity in town
The switch from fossil fuels to renewables is likely to take many years, with countries like China, India and Australia continuing to rely heavily on coal power for decades to come. The direction of travel, however, has been set.
Attaining net zero carbon emissions –or getting anywhere close – will require spending almost unimaginable sums of money. And much of this will come from ordinary retail investors and pension funds.
Boris Johnson’s government wants to persuade investors, including individual savers, to buy into the UK’s so-called green revolution.
The aim is to unlock £90billion of private investment in technologies to help tackle climate change, from hydrogen power to electric batteries and carbon storage.
Justin Modray, founder of Candid Financial Advice, says: ‘There is little doubt that investing to benefit from the move towards net zero will become more mainstream, especially as larger companies look to embrace that change.
‘However, investing in smaller companies focusing on renewables is not without risk – for every major success others will fall by the wayside, so it’s important to maintain a well-diversified portfolio.’ So where do the opportunities lie for you to make gains by going green?
Hydrogen power
According to the Prime Minister, one day in the not-too distant future we’ll be cooking our eggs and bacon with clean-burning hydrogen rather than natural methane gas.
The technology is in its infancy and there are various forms.
Blue hydrogen burns natural gas to create the electricity needed to separate water into hydrogen and water.
Green hydrogen is carbon free as it uses renewable energy such as solar power and wind power to create electricity.
Ben Yearsley, investment director at Shore Financial Planning, says that those wanting to bet on hydrogen could buy shares in ITM Power. This Sheffield-based company makes the electrolysers needed to obtain the gas from water.
Australian eco-warrior: Iron ore billionaire Dr Andrew Forrest is currently locked in a bidding war with BHP for over obscure Canadian nickel miner called Noront Resources
Its share price has risen almost 1,700 per cent to 363p over the last five years. But it’s been a turbulent ride, with the share price almost halving since their peak early last year.
Russ Mould, investment director at AJ Bell, says another strategy could be to plump for the Legal & General Hydrogen Economy Exchange Traded Fund (ETF).
It invests across the full gamut of the hydrogen industry, from electrolyser makers such as ITM Power to energy storage, component suppliers and fuel cell manufacturers.
For those wanting to invest more broadly in companies involved in renewable energy, from wind to solar power, Modray recommends the Ninety One Global Environment Fund.
An alternative is the L&G Clean Energy ETF, which tracks a basket of firms that are focused on clean energy.
Electrify your portfolio
Countries around the world have vowed to ban the sale of new conventional petrol and diesel vehicles in the not-too-distant future. The UK has committed to imposing a ban by 2030.
Copper, lithium, nickel, silver and cobalt are all vital components in the electrification of vehicles, and the lithium-ion batteries used to power them.
This is why Rio Tinto is planning to build Europe’s largest lithium mine in Serbia, while BHP has been locked in a bidding war with Australian iron ore billionaire Dr Andrew Forrest over an obscure Canadian nickel miner called Noront Resources.
Supply shortages and growing demand have meant lithium prices have gone through the roof, rising almost fourfold last year.
Nickel prices also leapt to record levels in September, partly due to a rise in demand from electric battery makers. Yearsley recommends the Amati Strategic Metals fund, which invests in a range of metals including lithium, cobalt, silver nickel and copper.
Going nuclear
It may not make you popular at dinner parties. But investing in nuclear power is one way of cashing in on the energy revolution.
Mould from AJ Bell points out China has announced plans to build 150 new nuclear power stations, President Macron has declared France will restart its nuclear power programme and the UK has begun to champion Rolls-Royce’s modular nuclear reactions. Given the vagaries of the weather, wind and solar power will only get you so far.
The price of uranium – used to power nuclear fission – almost doubled from $27 a pound to $50 a pound last year.
But it peaked at $130 a pound in 2007, so it has a lot further to rise if political momentum continues to build. ‘It’s not the answer that environmental campaigners may expect to hear and it’s is unlikely to be a message they want to hear either, but uranium could be emerging as a winner from the green revolution,’ says Mould.
He suggests Yellow Cake, a small company listed on London’s junior stock market, which has a stockpile of uranium stored in Canada. Or the Geiger Counter Investment Trust.
Big mining, oil and gas
Again, it will not endear you to Greta Thunberg, but that’s not necessarily a bad thing.
Yearsley says the reality is that some carbon-emitting corporate giants such as mining behemoths Rio Tinto and BHP will be big winners from the transition.
‘There is a huge amount of money to be made,’ he says. ‘But the uncomfortable truth of decarbonisation is you need to dig a lot of stuff out of the ground to make the world cleaner, at least in the foreseeable future.
‘You need coal to make the steel to make the wind turbines. So investors may have to hold their nose.’
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