Impact investing is not mainstream but it soon will be. The shift to create a positive social impact through adapting ESG (Environmental, Social and Corporate Governance) criteria isn’t just for cool start-ups who have invented a new A.I. that makes a faster Drip Coffee.
Companies who don’t adhere to ESG or shirk environmental regulations will find themselves facing a new “climate justice” division within the Justice Department.
Suddenly, ESG is now a bottom-line priority for companies and not simply the new brand guidelines laid out on a flyer in the company break room. ESG is here to stay and it will present new opportunities to make some serious money through impact investing.
So, let’s take a look at two major impact investing predictions for 2021 and how you can take advantage of them for great returns.
The incoming administration has made the creation of a “Green Infrastructure” a top priority. In fact, they announced a plan to spend $2 Trillion dollars over the next 4 years to completely overhaul the current, outdated infrastructure.
Among the overhaul will be a focus on making commuter trains, buses and passenger vehicles run on clean energy. In addition, the plan would encourage the development of electric trains for Amtrak and private freight companies
Also under the proposal, would be the local development of clean light rail and bus systems and incentives to upgrade housing and commercial buildings to make them more resistant to extreme weather.
It’s an ambitious agenda but the influx of massive spending will create a demand for jobs, technology and contracts. You can be sure that companies will be lining up and if you are like me, you already see multiple impact investing opportunities such as:
1) A Clean Energy investment like Nextera Energy (NEE) who is one of America’s largest capital investors in infrastructure and innovative clean energy
2) An Electric Battery investment like Tesla (TSLA) who is the clear leader in battery technology and would most likely be involved in any conversation regarding Amtrak’s conversion to electricity
3) A Residential Home builder investment like DR Horton (DHI) who is the largest residential home builder in the United States and would benefit from government incentives to focus on creating protection against extreme weather.
The opportunities are too numerous to count and you could quickly get overwhelmed trying to find the right stock to buy. That’s where the creation of a social impact fund or Green Infrastructure ETF could provide an opportunity for investors to take part in a balanced fund that would clearly have serious momentum behind it. Imagine an ETF whose primary holdings had the wind of a $2 trillion dollar government spending plan behind it.
Even better, if this ETF became a 3x leveraged ETF it would apply greater leverage to try and gain three times the return of their underlying indexes. 3x leveraged ETF’s are riskier but if we look at three Direxion’s 3x ETF’s 1-year performance, you can clearly see the potential.
1) Biotech ETF (LABU) 1-Year Performance: +57%
2) Semiconductor ETF (SOXL) 1-year Performance: +99%
3) Technology ETF (TECL) 1-Year Performance: +71%
These ETF’s have clearly benefited from the current social and economic climate and would share very similar characteristics to a Green Infrastructure ETF. My guess is that the creation of this ETF is already underway. Stay tuned.
Since 2016, Equity Crowdfunding has gained a tremendous amount of momentum. In 2018, the market size was $84 billion. That number is expected to rise to $114 billion by 2021. Retail investors, who can invest as little as $100 in products that could change the future, are fueling the rise.
And with news of the $2 trillion dollar spending plan on green infrastructure, new, clean-tech startups will be growing at an even greater pace.
Top Equity Crowdfunding platforms like Wefunder and Start Engine already have entire sections dedicated to clean-technology and green infrastructure funds.
These type of investments are sure to grow. In fact, there is a good chance that we will see equity crowdfunding platforms that are entirely dedicated to clean energy and green infrastructure. The opportunities are endless with equity crowdfunding and its effect on social impact investing.
Imagine a large company like Caterpillar vying for a government contract to develop green infrastructure. That contract is a lot more likely to get signed if Caterpillar has the underlying, clean technology to support the job. That makes Caterpillar a lot more likely to acquire a clean tech start up. And any equity crowdfunding investors who had money in that start-up, stand to make a huge multiple.
These two predictions may or may not come true. But I think they will.