Are we starting to see a dramatic shift in investment returns based on the environmental impact companies have?

by | Jan 10, 2020 | Analysis

The value of Tesla shares has more than doubled over the past 6 months. Similarly, if you had invested in vegan meat producer Beyond Meat when they launched last summer you would have seen a tripling of your investment. Are markets starting to price in some of the seismic shifts that consumers are making?

Writing about share prices and trends is always at the risk of holding oneself as a hostage to fortune. So we are making no predictions for any shares in particular but we merely observe the world around us. Since The Path was set up we have believed that companies that “do good will do good”. A spin-off of our methodology is that our clients will avoid dying industries as consumers change their habits and shun bad governance, thus avoiding poor returns from ailing dinosaurs. Better still our clients will be exposed to emerging technologies and the move to investing in sustainability with the positive investment returns that will surely ensue.

We thought it would be interesting to look at “pairs” of stocks in 3 sectors more or less at random to see if there were any interesting patterns. It is certainly food for thought:

Investment Management
Impax Asset Management only runs funds that seek to have a positive impact on the world. They are winning mandates and attracting new funds under management. Contrast with Hargreaves Lansdown who are a platform with more conventional funds:
Power
Drax is one of the biggest CO2 producers in the UK. They are spinning a green tinge to their activities with their trumpeted switch to “biofuels”. Sounds great but it just means burning (mostly imported, by boat, from the US) wood pellets instead of coal. Contrasted with Ceres who is a UK based fuel cell technology company. Ceres’ unique technology can create electricity from both natural gas, hydrogen, and sustainable fuel inputs. This makes it highly adaptable in the green energy transition:
Energy
Renewable – Greencoat UK Wind plc versus Non-renewable (or as we used to call it before the euphemistic and less ugly window-dressing was applied to the sector: “oil and gas”) in the shape of BP plc:

The examples above are very narrow and short-term and it would be rash to jump to any conclusions. Nonetheless, you would have been a happier investor to have been with an adviser who even in these “pair trade” situations chose the option of progressive evolving innovative businesses over those who greenwash or adopt an ostrich-like posture in the face of change…

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