For years I have been intrigued by the emerging “clean energy” market. When I was still in high school, I took it upon myself to invest my casino winnings in various clean energy start up companies. Today, the portfolio is worth a whopping $10 and change. What I didn’t know was that according to Goldman Sachs, “the mass market adoption of any disruptive industry often takes the party of early enthusiasm followed by market rejection, volatility and ultimately acceptance”. A recent article likened the recent green revolution to the internet bubble of the late 1990’s/early 2000’s where global internet communication increased from 1% in 1993, to 97% in 2007. While green energy is on pace for a much smaller scale increase (the United States’ goal is to increase solar energy output from its current 1% level to 10% in 2025) it is still an indication of a potentially huge opportunity for investors.
According to an article on techcrunch.com, Goldman Sachs will commit $40 billion to renewable energy by 2021, and Citi will commit over $100 billion by 2025. It appears as though investing in clean energy is not only the “right” thing to do, but the ECONOMIC thing to do as well.
While traditionally giant banks such as Goldman and Citi have been the only ones with enough capital to back these disruptive industries, new financial innovations have allowed smaller investors to gain access to virtually every asset class. Companies such as Lending Club have paved the way for smaller cap investors to get a piece of the emerging peer to peer lending market. Similarly, Green bonds, YieldCos, and clean energy index funds are just a few of the financial innovations that are allowing these investors to tap into the clean energy market as well. These small cap investment tools, combined with historically low interest rates are making it easier than ever for start ups to acquire capital and grow into potentially industry disrupting businesses that will make clean, renewable resources the energy of the future.