In case you haven’t heard about the latest buzzword, it’s “green”. Green living, green cars, green houses, green lifestyle, and now – green investing. The mutual fund market has been quick to provide a push button conscience cleaner – SRI (Socially Responsible Investing) index funds.
Let’s take a step back and look at the situation for a moment. We are running out of the resources that make our life possible on this earth. We’ve put poison into our air, our waters, and our bodies. Why? Convenience.
Convenience got us into this mess, and I have a hunch that convenience isn’t going to get us out. Green investing can be VERY profitable. This is because better technology yields better results, and better results means savings. Savings means profit.
2 reasons why the real profits aren’t in a green mutual fund or stock
- Large companies might not want to make progress. If you have a monopoly on an inefficient product, it’s sometimes more profitable to fail at progress. Don’t believe me? Watch the documentary Who Killed the Electric Car? and decide for yourself.
- Small companies have to be innovative to grow and profit. A startup company who has to face its VC investors needs to make progress fast. There’s a little more incentive here than there is for an Exxon or most any publicly traded company or fund. Look at some of the most recent incredible successes: Microsoft, Dell, Google, Paypal, Myspace, Ebay, Facebook, etc. With each of these companies, the real innovation came early because it had to, and it’s often followed by stagnation once funded with billions of dollars (where’s Microsoft’s continuing innovation?)
If you are thinking that I recommend you search the garages of America for the next Bill Gates, Michael Dell, Larry Page, or Pierre Omidyar, then think again. Get creative, think outside of the box.
Here’s one I’ll throw at you to get the creative juices flowing (and feel free to play devil’s advocate):
Find a company that installs solar panels on homes and buildings. Ask how many years it takes for the equipment to pay for itself through savings. Ask how many years the equipment will last and/or the length of the warranty period. If the warranty period is significantly longer than the cost recovery period, offer to provide lease financing – meaning you will buy the equipment and have the end user lease it from you. The equipment salesman can then go out there and sell the solar panels for zero cost to the property owner (makes for an easier sale so they’ll really like you), and there’s profit in it for you. Your actual profit will vary depending on which equipment supplier you use and the rates of the power company in that area.
My challenge to you: Take the above scenario and crunch some numbers before you hand your money over to a green mutual fund.