Investors have lost money betting the organic farm on the green revolution.
"Everything's Gone Green", New Order sang back in 1981, but if they were talking about the global economy, the Manchester indie band got it badly wrong.
Everybody's been talking about going green for years, but we haven't done much about it.
We still burn all the oil we can suck from the ground. China still opens a coal-fired power plant every week. We still take cheap flights, drive 4x4s, poison the oceans, ratchet up the food miles and chop down rainforests.
Recycling our potato peelings isn't going to offset all that.
New energy, new losses
All of which is bad news for investors that bet the organic farm on the green revolution and raked up big losses. Saving the planet hasn't paid, so far.
Take a look at BlackRock New Energy (LSE: BRNE), which invests in alternative energy and technology. This £100m investment trust is down 50% during the past three years, and 12% down within the past 12 months. I sold it ages ago, thankfully. Its benchmark Environmental sector is down 25% throughout three years, too.
Yet this doesn't stop fund managers from straying back into the sector, hoping this time it's different… and the green energy revolution is finally upon us.
The latest hopeful is the L&G Investments (LGI) Global Environmental Enterprises Fund, launched last week, which hopes to cash in on what it calls the green megatrend.
Quite catchy, that. But as the chorus to that New Order song went: "Seems like I've been here before".
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The green megatrend has suffered more false starts than a wind farm in an intermittent breeze. The global economy is built on oil and until more sustainable alternatives can compete on ease and price, all the good intentions in the world won't make us switch. And it is a sad fact of life that good intentions all too often make for bad investments.
This hasn't deterred LGI, however, which says we are in "a time of increased environmental interest from the public". There are certainly plenty of environmental worries out there. LGI cites events at Fukushima, Germany's decision to eradicate nuclear dependence by 2020, droughts in the UK, floods in Asia and Africa, and general energy and water security fears. The fund will target companies that are working on solutions to these global issues, and divide itself into three sectors: energy efficiency, low-carbon energy production and control of water, waste and pollution.
Simon Ellis, managing director at LGI, says global warming and climate change are the new global megatrend: "As the world gets hotter, we're going to have to be much more efficient in how use energy."
Even if you don't accept the case for anthropogenic global warming (I broadly do), you can't deny energy efficiency, and controlling water, waste and pollution, are all worthy goals. But can investors make any money out of them?
A cold investment climate
Green energy hasn't warmed investors' hearts so far. Remember the spate of climate-change funds, launched towards the end of 2007? I'll jog your memory: F&C Global Climate Opportunities, Schroder Global Climate Change and the Virgin Climate Change Fund? I wrote about them here. Maybe they are fixtures in your portfolio, but I doubt it. During the last three years, F&C is down 3%, Schroder is up 3% and Virgin is down 27%. And the planet is still getting hotter.
The world certainly faces plenty of energy and environmental challenges. There are almost 7 billion people on earth, and it seems we all want to consume like North Americans.
The result: food and fuel shocks, Middle Eastern revolutions, emerging-markets inflation, extreme weather, ruined oceans and a green revolution that never quite happens. Like the credit crunch, these could all be building up to a massive shock that could shatter the global economy. The energy crunch will come when we realise oil is running out.
As in all eco-debates, peak oil has fallen victim to the dreary left/right split. The left say it is already upon us, and the current capitalist model is doomed… yet the right say decades of oil remain, we just need bigger drills. But with global oil demand set to hit 90m barrels a day, up from 87m last year, only a lunatic would say we can continue drilling at this rate forever. We need alternatives… but the trouble is that wind, solar, wave and algae ain't there yet.
It's not easy being green
Energy will surely be one of the biggest investment themes of the next 10 years. I was tempted by the recently launched unit trust Artemis Global Energy, which aims to invest across the entire energy chain, including oil and gas exploration, energy transmission, utility providers and alternatives. That looks safer than putting all your money on green.
I wouldn't completely right off alternative energy, though. China is pouring money into the sector. If it can deliver economies of scale through mass production, green could be go.
But it will always be a risky sector. The world needs energy like never before -- we just don't know which alternatives will be the winners. Look at nuclear. It was enjoying a dramatic reversal from eco-villain to eco-hero, until the Japanese tsunami.
Perhaps the green megatrend is upon us. But I think I'll let somebody else lose their money backing it.
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