ENVIRONMENTAL REGULATION AND INVESTING

With the 2020 election now officially behind us, let's take a moment to buckle our seatbelts and get ready for what comes next. For four years as president, Donald Trump set about rolling back policies meant to cut emissions and reduce greenhouse gas production. Vast swathes of land were opened for oil and gas exploration and extraction, while tax credits and incentives for energy-efficient vehicles were allowed to expire.

The newly elected President Biden campaigned on the premise that he would take a hard on the environment calling climate change "the existential threat of our time". Less than a month into his presidency he has begun delivering on that promise. Within days he reversed the Trump era executive actions that had opened the arctic sea for oil and gas drilling and us set to restore the original boundaries of some controversial national monuments right here in my home state of Utah. He revoked the executive action that weakened the clean air act and reinstituted prior limits on greenhouse gas emissions by the federal government.

Those actions mentioned above, are just the tip of the iceberg. Currently, President Biden has over 30 policies that are labeled "under review". In full disclosure, most of the policies under review, and the changes that we are likely to see will have little to no effect on your life. That's not to say they aren't important, because all added together they will hopefully contribute to a cleaner planet. I simply mean that your day-to-day life is not going to feel much different, if at all.

The reason you won't feel many of the changes is most of them are directed at businesses and industry. The heaviest burden of new regulation will be borne by corporations.

I have long been an advocate for green investing. Since I began in the financial industry I could see the positive change that could happen if the concepts involved in green investing could become more commonplace. I have written numerous prior blog posts about the merits of green investing. Why I think it matters, what kind of difference it can make, how to get started, etc. In light of our current political situation, I feel that now, more than ever is the time to get serious about green investing.

In the past, all of my thoughts about green investing were directed at the altruistic investor. I was writing for the investor who wanted to put the planet first when it came to their portfolio. Now, I am writing to the investor who simply seeks to earn the greatest return possible on their investments, and I am not alone in doing so. Larry Fink, the CEO of Blackrock, has for over a year been extolling all who would listen that green investing was going to play a paramount role in investing going forward.

We stand now at a critical point. On one side public sentiment continues to demand more environmentally friendly business practices. On the other side, after four years of opposition, the federal government is now ready to act in accordance with that sentiment by slapping new regulations on business.

For some firms, this will mean a massive investment of time, money, and resources to become compliant with the new requirements. However, for other firms, the new regulations will simply validate their current business model.

The latter companies (let's call them green companies) will soon likely find they have a competitive advantage over their peers who had not been as environmentally responsible. While their competitors are investing capital and time into changing their business practices, these green companies will simply continue doing business as usual. While their competitors are investing in simply keeping up, the green companies can be investing in their future. Green companies can be creating new products and new ideas, forming new channels, and increasing efficiency. In short, green companies have the potential to thrive in this new environment.

This begs the question, which kind of companies do you currently own, and which kind do you want to own? I think you owe it to yourself to at least discuss the topic with your financial advisor.