Investors swoon over green equities, but do they deserve the love?
globeandmail.com | Published 13 September 2016
By Joel Schlesinger – Special to The Globe and Mail
Green equities often take a back seat in investment portfolios. But they are increasingly de rigueur among institutional investors who are divesting themselves of climate-change-inducing industries such as oil, gas and coal.
Although the selection of investments in wind and solar power and other so-called clean technologies is better than even just a few years ago, it still pales in comparison to the industry it aims to replace. That means investors should be able to find leaders in this sector that are poised to grow with expanding demand, says Tom Konrad, editor of AltEnergyStocks.com in New York.
“The one thing to point out about the whole divestment movement is that the number and size of investments that foundations and funds are moving out of is creating a pool of money much larger than the substitute: clean-tech,” he says.
“So if even a tenth of this pool is put into green investments, it could cause the prices of those investments to skyrocket.”
But not all clean-tech investments are equal. Here are a few to consider.
TransAlta Renewables Inc. (RNW)
This company was spun out by its parent firm, TransAlta Corp., a major electricity provider, to focus solely on production of renewable energy. Its assets include 18 wind facilities with a 19th being added in Quebec, and 13 small hydro facilities across Canada and the United States.
It’s “a major player in the alternate energy sector and Canada’s largest wind energy producer,” says Stephen Whipp, managing director of responsible asset management at Leede Jones Gable Inc. in Victoria.
Since its inception, TransAlta Renewables has produced steady income with dividend growth of about 25 per cent. Like many income oriented companies, however, it is sensitive to rising interest rates that affect its bottom line and ability to pay a competitive yield…
GreenPower Motor Company Inc. (GPV)
The Toronto-listed firm may be ideal for investors seeking to add a little more risk to their portfolios in exchange for potential high growth, says Mr. Whipp.
This company has moved from offering one model of electric vehicle (EV) bus to offering several, including a double-decker. The Vancouver-based company is still in its early stages, and a lot can go wrong as it seeks to win larger contracts, he warns. Moreover, it still relies on other companies’ facilities to manufacture. But it plans to increase its capacity.
Most importantly, GreenPower is selling buses – albeit in small numbers – and is an early industry leader. “Like most early industry adopters, it is usually the first to prove reliability,” and in turn, profitability, Mr. Whipp says.