It was in 1975 that I first saw “Iron Eyes” Cody shed that single tear in a “Keep America Beautiful” commercial on television.
I was five years old.
That was the day I became an environmentalist.
And I make no apologies for this.
It's absolutely incomprehensible to me how anyone could take all the beauty God has created and treat it like a sewer.
That being said, I'm also a capitalist. And I firmly believe that if we have any chance of preserving this planet for future generations, we must not only act responsibly in our daily lives, but we must also invest in the solutions that will enable this lofty goal.
Although I do have one stipulation...
Those investments must be profitable.
In 2005, I started writing an investment advisory called Green Chip Stocks.
The idea was to invest in companies and technologies that were at the forefront of the “green” movement.
I'm talking about everything from solar power to organic food.
Anything that did right by the planet was fair game... as long as it could return a profit.
Now, when I first started, I was met with plenty of suspicion and doubt.
How could anyone make a buck in renewable energy or organic food production? To many, the idea seemed absurd.
But that's exactly what we did.
Of course, back then, most investors were either clueless or hostile to the idea of investing in green.
One reader actually sent me the following e-mail:
Why the hell would you invest in renewable energy? You have no idea what you're talking about. No one's ever made money from solar and no one ever will.
This kind of response wasn't surprising, though. And it really didn't bother me. After all, history is filled with stories of naysayers who got it wrong in a very big way, especially when confronted with huge, disruptive changes in technology.
Heck, back in 1903, the president of the Michigan Savings Bank told Henry Ford's lawyer, Horace Rackham: “The horse is here to stay, but the automobile is only a novelty — a fad.”
Fortunately, Rackham didn't listen, and he invested $5,000 in Ford stock. He later sold it for $12.5 million.
Still Going Strong
Back in 2005, there were a lot of Horace Rackhams — folks who refused to believe that anything even remotely associated with sustainability or environmentalism could be profitable.
But none of that ever really mattered to me. The only thing I was concerned about was making money and helping to facilitate the growth of some very successful renewable energy and organic food companies.
And that's exactly what I did. I also made quite a name for myself in the process.
Within a year of launching Green Chip Stocks, I was appearing on Fox, CNBC, and Bloomberg as a featured guest. I was being invited to speak at various investment conferences all across the globe (and getting paid thousands of dollars to do so), and I was even tapped by Wiley Publishing to write a book on investing in green chip stocks, which ultimately went on to become a best-seller.
My desire to promote the environmental movement ended up netting me an enormous fortune, while also helping other like-minded investors do the same.
And here's the best part...
We're still going strong, generating huge profits year after year while making the world a better place. And I couldn't be happier. In fact, it's for this reason that I decided to write this e-book.
Doing Well by Doing Good
Working in the world of finance for nearly three decades now, I've developed some pretty thick skin.
After all, being an outspoken environmentalist anywhere near Wall Street tends to come with some pretty heavy hazing. But it doesn't really bother me.
As long as I'm doing my part to promote environmental sustainability while making my members a boatload of cash, I'm fine. Couldn't be happier, really. Especially since the members of Green Chip Stocks are not just window shoppers — these are folks who really get what we're doing here.
They share my desire to protect the planet while building wealth.
Doing well by doing good.
It's a mantra that we take to heart, and it's also one that's proved to be quite common amongst some of today's wealthiest individuals.
Warren Buffett, for instance, has about $30 billion invested in clean energy right now, mostly in wind and solar.
Then there's Elon Musk, who not only made electric cars cool but also invested nearly everything he had in electric car company Tesla Motors (NASDAQ: TSLA), which is now the premier electric car brand.
Bill Gates, of course, has ponied up billions to facilitate new research and development into clean energy start-ups. He's also a member of the Breakthrough Energy Coalition, which is essentially a group of billionaires that got together to pony up billions to advance the clean energy economy. I'm talking about guys like Mark Zuckerberg, Vinod Khosla, John Doerr, Tom Steyer, Jack Ma, George Soros, Jeff Bezos, and Richard Branson.
Folks, these guys didn't become billionaires by investing in the wrong things. They became billionaires because they're exceptionally smart, exceptionally talented, and exceptionally shrewd entrepreneurs.
So while you might hear some folks on television or on some random Internet message board criticizing clean energy, the richest people on the planet are investing on a massive scale.
And let's face it: The best way to build wealth is to invest alongside wealthy people. It's not rocket science.
Only a Fool...
Now, this idea that caring about the environment is somehow at odds with wealth creation is outdated. It's a fallacy. In fact, it's worthy of mockery.
Only a fool would look at what's going on in the world today and think investing in the things that will make our world cleaner, safer, and more peaceful is a bad idea.
Especially when you look at how much money green chip investors have been making since 2006. Just take a look at some of these winners:
- First Solar (NASDAQ: FSLR) — 1,144%
- SunPower (NASDAQ: SPWR) — 420%
- SolarCity (NASDAQ: SCTY) — 663%
- Tesla (NASDAQ: TSLA) — 1,450%
- Whole Foods (NASDAQ: WFM) — 1,160%
- Hain Celestial (NASDAQ: HAIN) — 737%
- Ormat Technologies (NYSE: ORA) — 243%
- U.S. Geothermal (AMEX: HTM) — 252%
- SunOpta (NASDAQ: STKL) — 1,149%
- Vestas Wind Systems (OTC: VWDRY) — 1,206%
But I didn't write this book to talk about how much money green chip investors have been making for a decade now. Instead, I wrote it to show you why you should have some percentage of your portfolio dedicated to “green” stocks.
Be a Part of the Solution
At Green Chip Stocks, we only invest in sectors that are good for the planet or promote a peaceful and just society.
Now, if you think this sounds like hippie-dippy nonsense, then maybe this book isn't for you. And I certainly have no interest in debating the importance of environmental sustainability with anyone. It's just not worth my time.
But if you think environmental sustainability and living in a peaceful and just world is something worth striving for — instead of mocking — keep reading. Because in this book, you're going to learn how to be a part of the solution while creating significant wealth along the way.
There are four specific sectors we focus on at Green Chip Stocks. The first, and the one that's been the most profitable for us over the years, is clean energy.
From an environmental perspective, a well-diversified mix of solar, wind, geothermal, energy efficiency, and conservation is superior to fossil fuels. From production to consumption, it's pretty much a no-brainer.
But in order for an environmentally superior energy mix to thrive, it must also be economically superior. And that's exactly what we're seeing today.
You see, there's been a dramatic decrease in renewable energy production costs over the past few years, particularly in the solar space, where the cost to install solar has dropped by more than 70% since 2010.
The wind energy industry has seen massive price declines, too. And those lower prices have resulted in meteoric growth.
The bottom line is that we're now about two years away from total grid parity — that is, when renewable energy technology can produce electricity for the same cost as conventional electricity that's currently provided from a transmission and distribution grid.
Once we hit grid parity, it's game over for fossil fuels. It's just that simple. And while some folks still can't even fathom such a thing, this transition to a cleaner energy economy has already begun.
Bottom line: There's no denying that a strong mix of renewables, energy efficiency and conservation, and storage is the new energy paradigm, as it's quickly becoming the most economic paradigm. And those who refuse to accept this reality will miss out on one of the greatest investment opportunities of a lifetime.
As former Governor Arnold Schwarzenegger recently said:
I don’t want to be like the last horse and buggy salesman who was holding out as cars took over the roads. I don’t want to be the last investor in Blockbuster as Netflix emerged.
That’s exactly what is going to happen to fossil fuels.
A clean energy future is a wise investment, and anyone who tells you otherwise is either wrong, or lying. Either way, I wouldn’t take their investment advice.
The Carbon Conundrum
The transition away from fossil fuels is definitely happening, and investors would be wise to adjust their investment strategies to coincide with this transition.
In fact, with new global policies now underway — specifically policies designed to limit CO2 emissions — exposure to fossil fuels could end up burning you in the long run. Because make no mistake; these policies are going to impose a heavy burden on the fossil fuel industry as we move forward.
As Mark Carney, the Governor of the Bank of England, recently said:
Policies to address climate will render the vast majority of fossil fuel reserves stranded. We're talking about oil, gas and coal that will be un-burnable.
The truth is, regulators are starting to send clear signals to the market that a shift from fossil fuels to cleaner energy is underway. And the result of this shift will end up stranding massive stockpiles of fossil fuels — stockpiles so large that it would take $2.2 trillion in CAPEX to produce those stockpiles.
But due to the high carbon costs associated with fossil fuels, it simply won't make sense to spend that $2.2 trillion. It will simply become too cost prohibitive to do anything but abandon those assets. And that'll crush investors who still believe there's a future in fossil fuels.
Of course, the smart money's already starting to distance itself from this risk.
$2.5 Trillion Up for Grabs
According to data released to Bloomberg, portfolio managers pledged to transition $2.5 trillion in investments away from fossil fuels. To put that in perspective, portfolio managers in 2014 pledged to transition $50 billion away from fossil fuels. That's a 50-fold increase!
Why the change of heart?
Some have suggested that many of these portfolio managers simply want to make an effort to reduce CO2 emissions. And while I'm certainly happy to hear about any portfolio manager doing something so altruistic, the truth is that it's simply becoming too risky to invest in fossil fuels.
As researchers at Arabella Advisors have pointed out, climate risk to investment portfolios is helping drive the exponential growth of divestment from fossil fuels.
Reports by Citigroup analysts, HSBC, Mercer, the Internal Energy Agency, and the Bank of England have offered evidence of significant, quantifiable risk to portfolios exposed to fossil fuel assets in a carbon constrained world. The leaders of several of the largest institutions to divest in the past year have cited climate risk to investment portfolios as a key factor in their decisions.
The Citigroup report actually warned that current target carbon emissions reductions could strand over $100 trillion of fossil fuel assets by 2050, noting that globally, a third of oil reserves, half of gas, and over 80% of coal could be stranded.
Meanwhile, as these large institutions divest from fossil fuels, they are re-investing in clean energy.
As Arabella points out, institutions committing to divest have also collectively pledged to invest billions of dollars in climate solutions. Those institutions and individuals that have pledged to both divest and invest in climate solutions collectively hold $785 billion in assets.
It's Not Rocket Science
It's all pretty simple, really...
As noted by Bloomberg, the race for renewable energy has passed a turning point.
The world is now adding more capacity for renewable power each year than coal, natural gas, and oil combined. And there's no going back.
The shift occurred in 2013, when the world added 143 gigawatts of renewable electricity capacity, compared with 141 gigawatts in new plants that burn fossil fuels, according to an analysis presented Tuesday at the Bloomberg New Energy Finance annual summit in New York. The shift will continue to accelerate, and by 2030 more than four times as much renewable capacity will be added.
The price of wind and solar power continues to plummet and is now on par with or cheaper than grid electricity in many areas of the world. Solar, the newest major source of energy in the mix, makes up less than 1% of the electricity market today but could be the world's biggest single source by 2050, according to the International Energy Agency.
I'm not saying fossil fuels are going to go gently into that good night, but from the perspective of an investor, which would you rather invest in? Fossil fuels, where all forecasts are showing a decrease in capacity additions? Or clean energy, where all forecasts are showing a massive growth in capacity additions?
Again, it's not rocket science.
And of course, the icing on the cake is that the more clean energy that's integrated into the global energy economy, the less damage we end up doing to our air, soil, and water. It's a win-win for any individual who believes we should respect the planet instead of destroying it.
Organic food markets have also paid off for us quite well over the years. But before I get into the details on organics (and how to profit from this sector), let's back up a little so you understand why we invest in sustainable agriculture and food systems in general.
First and foremost, the antithesis of sustainable agriculture and food systems can be found in our modern-day, conventional, industrial models, which are both environmental and economic nightmares.
As the good folks over at the Union of Concerned Scientists have pointed out, the impacts of industrial agriculture on the environment, public health, and rural communities make it an unsustainable way to grow our food over the long term. And better, science-based methods are available.
At the core of industrial food production is monoculture—the practice of growing single crops intensively on a very large scale. Corn, wheat, soybeans, cotton and rice are all commonly grown this way in the United States.
Monoculture farming relies heavily on chemical inputs such as synthetic fertilizers and pesticides. The fertilizers are needed because growing the same plant (and nothing else) in the same place year after year quickly depletes the nutrients that the plant relies on, and these nutrients have to be replenished somehow. The pesticides are needed because monoculture fields are highly attractive to certain weeds and insect pests.
In the industrial system of meat production, meat animals are "finished"—prepared for slaughter—at large-scale facilities called CAFOs (confined animal feeding operations), where their mobility is restricted and they are fed a high-calorie, grain-based diet, often supplemented with antibiotics and hormones, to maximize their weight gain. Their waste is concentrated and becomes an environmental problem, not the convenient source of fertilizer that manure can be for more diverse, less massively scaled farms.
No matter what methods are used, agriculture always has some impact on the environment. But industrial agriculture is a special case: it damages the soil, water, and even the climate on an unprecedented scale.
Intensive monoculture depletes soil and leaves it vulnerable to erosion. Chemical fertilizer runoff and CAFO wastes add to global warming emissions and create oxygen-deprived "dead zones" at the mouths of major waterways. Herbicides and insecticides harm wildlife and can pose human health risks as well. Biodiversity in and near monoculture fields takes a hit, as populations of birds and beneficial insects decline.
This, dear reader, is how we feed most of the industrialized world. And it's a practice that I have no interest in taking part in. Not from an investor's standpoint, and certainly not from a consumer's standpoint.
But I'm not alone.
Truth is, there's been a steady rise in consumers seeking sustainable, organic food. And this is largely the result of potential health concerns related to industrial food production.
Factory farms that produce meat are breeding grounds for E. coli and salmonella outbreaks.
Cows, chickens, and pigs that are fed steady diets of soy and corn (instead of what God intended them to eat) result in meat that is nutritionally deficient and loaded with unhealthy fats.
There are dozens of ailments and diseases that have been connected to the overuse of chemical pesticides and herbicides. This is not conjecture; this is fact.
And let's face it: Who really wants to eat animals that spend their lives like this?
As noted by researchers at TechSci Research, consumers across the globe are becoming increasingly health conscious, which has resulted in a change in their tastes and preferences.
A growing number of consumers are moving towards consumption of organic food in place of conventional food, to avoid adverse health effects caused by chemical preservatives or genetically modified ingredients present in inorganic food. Moreover, the increasing popularity of organic products has significantly expanded the availability of organic food across the globe. With organic food becoming easily accessible, global organic food market is expected to witness remarkable growth over the forecast period.
Consumer behavior can be a wonderful thing when consumers are properly educated.
A Big Score
With the continued interest in sustainable, organic foods, there's been a continued rise in organic food sales.
And this, my friend, has resulted in a number of opportunities for investors to not only support the companies that embrace healthy, sustainable food production but actually profit from them.
One of my biggest scores ever came after I recommended buying shares of Whole Foods (NASDAQ: WFM) back in 2009 — right after the market tanked. Despite the recession, I knew demand for organic foods would not peter out.
Another success story for us in the organic foods space was Hain Celestial (NASDAQ: HAIN).
This was another one that got beaten down after the recession kicked in. Back in 2009, green chip investors were able to scoop up shares below $8.00. By mid-2015, the stock was trading around $68 a share.
Of course, those opportunities have come and gone. And while both companies are still powerhouses in the organic foods space, we're always looking to ensure that our investments, which are aligned with our values, are also paying off.
Sometimes this is difficult to do in the organic food space solely with public companies. After all, there really are only a handful of public companies from which to choose. But there's more than one way to profit from the rise in sustainable, organic food production.
One way to accomplish this is through private deals.
Typically these are only available for accredited investors, but as equity crowdfunding begins to pick up steam, we will see more private deals available for non-accredited investors.
One private deal that some Green Chip Stocks members jumped on in 2015 was with a small Canadian organic food operation called Athena Organic Farms. That deal allowed investors to invest a minimum of $25,000 in a debt vehicle that returned 8% per annum, plus a balloon payment of 30% of the original investment at the end of the term.
This was a quality deal, although few even knew about it. Fortunately, through my vast network of contacts, not only was I able to uncover the deal, but I was also able to visit the operation, interview management, and present it to our members.
Typically we find three or four of these types of deals per year.
For those who are not accredited investors, there are also opportunities through various funds or through new equity crowdfunding models. I also cover these in our Green Chip Stocks community.
Socially Responsible Investing
I was in my late twenties when I discovered this crazy thing called socially responsible investing (SRI).
A socially responsible investment is one that takes social, environmental, and corporate governance criteria into consideration. The idea is that a socially responsible investment is one that delivers both financial and social returns.
While there are still plenty of folks who either have no idea such a thing exists or simply think the concept of SRI is a bunch of tree-hugger nonsense, in 2014, nearly $7 trillion under professional management was funneled into socially responsible investments.
That's not chump change. So what's the motivation for SRI?
The good folks at the Forum for Sustainable and Responsible Investment note there are several, including personal values and goals, institutional missions, and the demands of clients, co-constituents, or plan participants.
Sustainable investors aim for strong financial performance, but also believe that these investments should be used to contribute to advancements in social, environmental and governance practices. They may actively seek out investments—such as community development loan funds or clean tech portfolios—that are likely to provide important societal or environmental benefits. Some investors embrace SRI strategies to manage risk and fulfill fiduciary duties; they review environment, social, and corporate governance (ESG) criteria to assess the quality of management and the likely resilience of their portfolio companies in dealing with future challenges. Some are seeking financial outperformance over the long term; a growing body of academic research shows a strong link between ESG and financial performance.
It's that last sentence that should motivate all investors — not just tree-huggers like me.
The iShares MSCI USA ESG Select Social Fund, which tracks the equity performance of companies with positive ESG characteristics, has returned more than 84% in just five years. That's pretty damn impressive.
Now, socially responsible investments can come in many shapes and sizes. From individual clean energy stocks to community investment plans that help aid in local job creation, socially responsible investing is not one-dimensional. And in fact, because of this, most folks who embrace and invest in socially responsible investments tend to invest in SRI mutual funds.
Some of the more popular include: PAX World Global Environmental Market Fund (PGRNX), the New Alternatives Fund (NALFX), and the Domini Social Equity Fund (DSFRX).
There are quite literally dozens of various SRI mutual funds in which to invest. Some perform better than others, but the bottom line is that demand for socially responsible investment opportunities is strong and becoming stronger by the day.
The interest in SRI certainly began with baby boomers, but Gen Xers and Millennials have also been quick to respond positively to socially responsible investments. Moreover, these generations — generally speaking — do not find any disconnect between creating wealth and creating a cleaner, more just world. And of course, there is no disconnect. If there was, we wouldn't have been able to make so much money over the past decade by investing in socially responsible investments.
Medical Marijuana is Socially Responsible
As I mentioned, socially responsible investments come in many shapes and sizes. And what some folks may see as a socially responsible investment, others may not. It really is quite subjective.
To give you an example of what I mean, here at Green Chip Stocks, we invest in the legal marijuana market because we believe this is a socially responsible investment for two reasons:
Denying a sick person medical marijuana to treat his or her illness — particularly when there is a mountain of evidence to suggest that it's effective — is the antithesis of being socially responsible. Telling a little girl with severe epilepsy that she has to live with 300 seizures a day because she's not allowed to be treated with medical marijuana is despicable. Telling a veteran that he can't treat his PTSD with medical marijuana is despicable. Telling a cancer patient that he or she can't use medical marijuana to increase appetite and ease pain is despicable.
One of the greatest tragedies of our generation is the continuance of the war on drugs. It's cost more than $1 trillion, and the cost of human life has been overwhelming. Moreover, the incarceration of non-violent drug offenders has disproportionately affected the poor, serving as a systematic form of slavery that traces its roots back to a federal bureaucrat that unapologetically used propaganda-style techniques that were also employed by Hitler, Stalin, and Mao.
This man's name was Harry J. Anslinger. He was appointed in 1930 as the first direct of the Federal Bureau of Narcotics.
Anslinger sought to outlaw marijuana as a way to ensure job security. After all, it would be hard to make the case for continued funding on just opiate and cocaine crackdowns. So he searched for a scapegoat and found it in the nation's poorer minority communities — a place where he knew there would be little backlash.
Of course, it didn't hurt that Anslinger was already known for racist rhetoric and a passion for outrageous lies based on little more than the illusions painted by yellow journalists.
The result? Well, take a look at some of these quotes...
“There are 100,000 total marijuana smokers in the U.S., and most are Negroes, Hispanics, Filipinos, and entertainers. Their satanic music, jazz and swing, result from marijuana use. This marijuana causes white women to seek sexual relations with Negroes, entertainers and any others.”
“... the primary reason to outlaw marijuana is its effect on the degenerate races.”
“Marijuana leads to pacifism and communist brainwashing...”
“You smoke a joint and you're likely to kill your brother.”
“Reefer makes darkies think they're as good as white men.”
“Marijuana is the most violence-causing drug in the history of mankind.”
This, my friends, was really the nation's first drug czar — the same man who got the ball rolling on an agenda that would eventually rip our nation apart.
So when folks ask me why I invest in legal marijuana, I simply say that it's because it's a socially responsible investment. And by the way, this investment has paid off big time and will continue to do so for many years to come.
It's the perfect combination of doing well by doing good.
I realize not everyone will agree with me on this, but there's one thing I'm sure most folks do have in common...
Using capitalism as a catalyst for change can usher in a new generation of wealth and prosperity — not just for investors but for all willing participants of the global community.
In 2005, I started writing a column called Green Chip Stocks.
Today, it's no longer a weekly article...
It's a full-blown movement that continues to enrich investors who want to be a part of the solution. Green chip investors want to create wealth, but not at the expense of the planet's health or the well being of those who call Earth home.
Green chip investors make profits by making the world a better place.
Green chip investors represent a new way of life and the next generation of wealth.