Divestment From Fossil Fuels: Best Routes Forward

Avery-Taylor Phillips  |

Fossil fuels remain high-risk investments that can become very volatile with little to no notice. Many savvy investors are looking to divest their holdings of fossil-fuel producers and liquidate crude assets. The path forward may not always be obvious as fossil fuels have been a staple of the market for generations. Making the right choices now may well prove prophetic as markets change and the move to alternatives in the space continues unabated.

The Energy Sector

Investors comfortable with the energy sector are unlikely to even consider abandoning it for pastures that seem more stable. While much of the focus is on the solar and wind markets these days, investments in uranium and lithium alternatives have also never looked better. These markets are invaluable for a wide swath of commercial and governmental sectors, and without continual growth in lithium, growth in the battery technology that provides much of the backbone for renewable energy resources seems far less likely.

Investment in backbone equipment and infrastructure in the energy sector continues to look like a solid bet. With the move away from fossil fuels, new facilities need to be put in place and older delivery methods retrofitted to solve the complex logistical issues that are sure to arise.

Keeping It Green

The Council on Social Work Education declared sustainability “to be the social justice issue of the new century,” and green investments remain at the forefront of growth thanks to regular developments in the field and the slow phasing out of fossil fuels. Clean mining operations and forestry services are important parts of the sustainable initiatives.

Companies that harvest the raw materials needed to move ahead with the creation of goods and services rely on investment from outside firms and organizations, and many of them are also involved in the logistics and delivery aspect of infrastructure building and repair. Others fuel the green building industry, helping reduce carbon footprints in the construction world and ensuring that new homes and offices operate with as little negative environmental impact as possible.

Sustainable Business

Companies that rely on sustainable business practices place people and the planet at the same level of importance as profit. This makes them a key market for cleaner energy and a likely growth sector following the continued divestment of fossil fuels. As new energy providers become available, sustainable businesses will have even more choices and likely reduced energy costs to drive their operations.

Many green businesses look to supplant existing companies by offering the same goods or services with a lessened environmental impact. Others are often arms of larger organizations that serve to test initiatives for the parent company, smoothing the road to green developments before the organization embraces them as a whole. Investment in these startups and subsidiaries, especially early-on in their development lifecycles, can pay off greatly while also helping advance the growth of green industry and the agricultural initiatives that drive it.

E-Commerce Investments

Those willing to step entirely outside the energy arena, and those looking to diversify portfolios following divestment of funds featuring fossil fuels, may also look into the E-commerce world. A large number of companies have come a long way since the first dot-com stocks appeared on the markets, and many of them drive innovation in sustainable technologies with minimal reliance on fossil fuels. That means that the slow transition between energy sources is less likely to have a direct impact on their profits or growth.

Some investors may even take a different option. Purchasing E-commerce storefronts with a proven track record as a hedge to equities acquisition may offer some value to investors who seek a quicker return than the gains usually available through these markets. Just as many tech companies buy smaller startups to maximize their growth, investors who hedge with E-commerce can gain a level of market independence unavailable to those who stay entirely in the equities field during times of turbulence.

The best routes ahead depend on the needs of your clients and your company’s fiduciary responsibilities. Divesting yourself of fossil fuel investments is only the first step, and bringing all of your investments in line with the shift towards renewable resources can deliver a solid advantage as markets shift to match the continual development of other energy resources.

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer


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