Participate in green tech through these ideas
Technological innovation has been on the forefront in disrupting multiple, rather almost all industries. It could be in the form of automation,...
Technological innovation has been on the forefront in disrupting multiple, rather almost all industries. It could be in the form of automation, eliminating layers (of distribution), reduction in emissions or pollutants, shrinking the time of commute or communication, etc. have changed the way businesses were carried out.
While some companies have pioneered these changes, many incumbents have adopted in their models to survive and thrive.
Last week we covered about how clamour for green alternatives could be setting a super cycle in metal and commodities. As the countries meet this year again to ratify and assess the progress of Paris climate accord, the impetus for greater integration of EV into mainstream only increases the resolve.
Till date, the industry has benefited from the govt. largesse at almost across the geographies including in India (at least last year's Budget provided tax incentive for purchases). Now, there has been a greater awareness among the consumers and larger public about the carbon footprint they're leaving behind.
This has resulted in the sustained growth of EV in the automobile sales which is primarily driven by the changing consumer trend of reducing the fossil fuel usage and also an alarming rise of fuel prices.
As the cost of ownership and maintenance of an ICE (Internal Combustion Engine) is narrowing that of the EV, there's a visible change in the consumer pattern to buy EVs. While this is the macro trend evolving and many forecasts highlighting the shaping up of their future, how could an investor take advantage of this trend?
In the public transport system, there's been an increased reliance of ethanol blended diesel fuels, Compressed Natural Gas and even Electric buses being used extensively.
The listed space is littered with options in this segment also with the likes of Indraprasta Gas and Olectra while there has been recent news of Ashok Leyland partnering with ABB to have developed the charging technology to the buses in just 20 seconds.
As I'd mentioned earlier, not all companies especially in the listed space related to these trends are involved in the pioneering or technological breakthroughs of this industry. But there are many companies trying to take advantage by chasing this trend and are fast adapting to it.
This is evident from many of the leading auto manufacturers like Tata Motors, etc. taking a lead by introducing a product range that's suiting the aspiring demographic. Then there're battery manufacturing companies like Exide Industries and Amar Raja batteries are investing in the new technology of Lithium-ion (used in EV).
Similarly, auto component manufacturers and the ancillary units are different from the ICE technology where the number of parts is substantially are reduced but replaced with a different kind of architecture.
Same is the case with the charging infrastructure which is completely different from the current fuel pump stations. This requires a huge real estate as unlike the current structure, fill and go is not easy for EV. Of course, there's lot of possibilities for the existing oil retailers (in terms of space) which could be doubled up as the charging points for EV.
The infrastructure isn't limited to only the EV but the source itself has to be from clean energy. Solar energy has been the leading producer of this green source and has been ramping up ahead of the other renewable like wind and natural gas for its abundance and ease of operation.
Governments across have begun to significantly increase the allocation and spurring the private sector continues to bid lower in the recent years bringing the cost of solar production towards that of the hydel power.
Investors looking to take advantage of these developments could consider investing through Environment, Social and Governance (ESG) themed funds which largely concentrate on stocks which have positive impact on the environment (by their overall operations), greater diversity of workplace with social responsibility and exhibiting good corporate governance.
Almost every fund house has been riding the bandwagon by launching newer funds on this theme. As we lack pure play stocks that are engaged in EV and green tech could explore the DSP NRNE (Natural Resources & New Energy) fund is a hybrid structure where over 70 per cent of the investment is routed to domestic equity which is into ferrous, non-ferrous metals, oil, gas and minerals while about 26 per cent of the allocation is into global energy and sustainable energy through BlackRock managers. Investors could enjoy the flavour of new tech in energy or sustainable energy equities in this fund.
(The author is a co-founder of "Wealocity", a wealth management firm and could be reached at firstname.lastname@example.org)