Author: Ishan Balakrishnan, Graphic: Nina Tagliabue
The BRB Bottomline
As countries and companies across the globe work together to build a cleaner and greener world, public and private investments in the energy industry have skyrocketed, eclipsing $500 Billion in 2020. But, while environmental policy has become a growing priority for several countries, current funding levels are not allocating enough money into green tech and renewable sources. To ensure that the warming threshold of 2 degrees celsius is not surpassed, investment in renewable energy will have to steadily increase in future years, totaling 6 trillion USD between now and 2040. Unfortunately, there is only so much that governing bodies can do; we, as consumers and stakeholders in the world, will have to start investing our own money into companies that strive to make the world a greener place. This paper will analyze why investment in green energy is decreasing and how individual consumers can help change that narrative by investing in three futuristic clean energy companies.
Global Overview: The Aftermath of COVID-19
Since the breakout of the coronavirus in early 2020, investing trends within the energy industry have rapidly changed, with less money funneled into clean energy sources and more money falling into the hands of fossil fuel giants.
Within the public sector, governments from every corner of the globe have pivoted away from green investments, especially in a covid-crisis induced world. As the global economy has tanked and since slowly rebounded, fiscal policy proposals have greatly varied within different countries. Yet, across the board, public investment has slammed the door shut on renewable energy and has turned to fossil fuel intensive investments. Funding into oil, infrastructure projects, and the traditional automobile industry has skyrocketed at the expense of renewable projects.
Within the private sector, the story is the exact same. Investment has steadily fallen, largely because private investors and venture capital firms have failed to receive substantial return on their investment. Indeed, while some renewable companies have succeeded in recent months, the vast majority have struggled to garner consistent revenue which has created fear and friction in the investing cycle. For example, a Chicago-based Clean Energy Trust started investing significant portions of their managed capital into renewables as early as 2006 but only earned a minimal return on investment (ROI). Indeed, more than ten years later, the firm concluded that renewable energy was simply not worth the high-magnitude risk. This is the story of several investment firms across the globe; while renewable companies were once heavily hyped up in the early 2010s, they simply have not been able to live up to that hype.
As a result of both of these factors, overall funding into renewable energy sources has consistently been decreasing, despite the energy sector as a whole seeing unprecedented investment growth. Renewable investment levels peaked in 2017 but have struggled to sustain high funding levels ever since.
While global investing policy remains essential to attaining climate goals, there are a few countries whose actions will be especially important in paving our path to a greener future: China, United States, and India, the three largest climate polluters and most populous countries, outputting a combined 18.12 GT of CO2 emissions in fiscal year 2018. As a result, global efforts will be heavily constrained without significant strides from these key players: China, U.S., and India. China is the world’s largest emitter with over 10 billion metric tons of annual emissions, with the U.S. and India following behind. The U.S. emits over 5 billion metric tons and India emits nearly 3 billion metric tons of CO2 each year. Together, these three countries combine to produce more than the next 20 largest countries in the world.
Luckily, there are several companies who are creating innovative technological solutions that can help mitigate the effects of climate change in these countries. It is our job, as stakeholders in society and the world, to seriously consider investing in them.
There are three futuristic green technology companies which are not only promising financial investments, but undoubtedly socially impactful organizations.
First, JinkoSolar (JKS)
JinkoSolar is a large renewable energy company based in China. They specialize in solar power generation and allow their customers to easily integrate a solar-based system into their properties. JinkoSolar is classified as the industry leader in solar energy production and they have successfully shipped over 150 million solar panels in just the last 4 years, an unprecedented amount. They are present in more than 100 countries worldwide and serve over 2 million households within just the United States, with that number growing each year. Because of JinkoSolar’s commitment to climate reform and their proven track record of reliability and dependability, their company has a promising economic outlook. Not only is this a safe investment, but it has the potential to be economically explosive, as JinkoSolar earned a 1-year trailing return of 223% last year. Yet, despite this high growth, JinkoSolar has tremendous room to grow even further, making it a hot investment opportunity.
Second, Siemens Gamesa (GCTAY)
Siemens Gamesa is a Spain-based company which focuses on wind energy through the implementation of complex high-output wind turbines in their world-renowned wind farms. Siemens Gamesa offers both onshore and offshore wind generation capabilities and has successfully been able to reach customers in over 90 countries. With their tremendous reach and deep market penetration in each country, they have been able to earn nearly $10 billion in annual revenue, while allowing investors to receive a 1-year trailing return of 112%. Despite having lower return rates than the two other feature companies, Siemens Gamesa with its widespread international presence, has the ability to be a high-impact and high-value investment.
Third, SunPower Corporation. (SPWR)
SunPower Corporation is a solar energy provider with strong roots in the United States, headquartered in San Jose, California. It is one of the main suppliers of energy for various U.S. manufacturing, construction, and infrastructure projects. It also offers Residential and Light Commercial segments to its core business which targets individual households and small businesses. In the past year, SunPower experienced much growth in all of its business segments, netting in a price to earnings ratio of 9.9006 with a 1-year trailing return of 218%. To investors while this return rate may seem unsustainable, SunPower corporation has strong leadership capabilities which will help them retain such growth on a consistent basis. Indeed, their mission statement sums up their journey and aspirations: “Our purpose is to change the way our world is powered, and our mission is to make solar the most compelling energy choice, inspire our people and communities to thrive, and to build a more sustainable future.” With their focus on furthering science and persuading the world that solar energy is valuable, SunPower’s success seems to be just getting started.
Climate change is often labeled as the greatest existential threat facing our society. Yet, in the face of rampant and destructive warming, politicians, investment firms, and people still find excuses for climate investment. While some people blatantly deny the reality of climate change, others find financial justifications such as “low ROI” to finagle a pass on climate investment. But, if we just took a closer look at the many renewable initiatives and green energy corporations, we would quickly realize the abundance of investment options that we have before us. Regardless, the sheer magnitude of the issue is a reason in and of itself for us, as a society, to put every bit of our money and resources into substantial climate reform. In the long run, it is very likely that clean energy will become the dominant source for our world’s activities. All that we have to do, as investors, is assess which companies are going to lead our charge to renewables. After all, if we fail to do so, we will be the stakeholders of a world which is on a one-way path to destruction.
Ishan is a first-year student at UC Berkeley pursuing degrees in Computer Science and Business Administration. As an Investing Columnist, he is super passionate to discuss topics relating to global politics, foreign policy, international finance, and the intersection of business and tech. Ishan is also an analyst for the Phoenix Consulting Group, and a software developer and business consultant for Berkeley’s premier startup accelerator, Convergent. In his free time, Ishan loves gaming with friends, and playing and watching tennis and basketball, while rooting for Roger Federer and repping the Dubs.