If you’re an energy investor, perhaps you want to invest in the oil and gas markets. The administration of President Trump is more hospitable to exploration than previous administrations. The price of oil has risen from the low levels seen in 2015 and 2016. Both these factors may influence you to invest in the oil and gas markets.
At the same time, though, the oil and gas markets are not sustainable. In the wake of the 2015 Paris climate accords, countries globally have committed to reducing and eliminating the polluting emissions that follow in the wake of oil and gas use. Investing in a polluting resource may seem less appealing than investing in a sustainable, renewable one, such as solar or wind power.
Investing Sustainably in Oil and Gas
Is there a way to do both? Can you invest in both the oil and gas markets more sustainably?
Yes. In fact, that might be the smartest investment in terms of financial returns. The International Energy Agency (IEA) says that demand worldwide will be growing for oil, but not by much.
It is expected to rise from 95.6 million barrels in 2016 to 101.6 million barrels by 2021, just 6.2 percent in a five-year period. Renewable energy capacity, on the other hand, is now a much bigger part of the energy picture than it was.
In addition, investing in renewables may be less complicated legally. Extracting resources such as oil and gas may trigger legal disputes about property or lease rights that violate some of the laws in place. Renewable energy doesn’t involve property or leases.
Here are three ideas for how to invest more sustainably.
One thing you can do is invest in both oil and gas markets and renewable sources like solar or wind power — just do it proportionally.
Assess how much money you want to invest in energy overall. Then, invest one-third of the money into oil and gas and two-thirds of it into renewables. In other words, if your overall investment is $9,000, $3,000 will go to oil and gas investments and $6,000 will go to investments in renewables.
Another idea is to donate either all or part of your profits to renewable energy nonprofits. A number of nonprofits exist, doing everything from educating people about the benefits of solar or wind power to providing equipment and expertise to people with lower incomes. You can choose your renewable energy cause of choice.
The third idea is a hybrid. With it, you would earmark specific dividends from your oil and gas investments to be reinvested in renewable energy investments. There is a specific type of oil and gas investment called a master limited partnership (MLP), which usually distributes a large proportion of its cash to shareholders.
These large dividends can be as high as five percent to seven percent per year. Usually, of course, an investor reinvests dividends in the same company that issues them. But if you invest in an MLP, you would be putting a healthy chunk of cash each year toward renewables if you reinvested in them instead.
Torn about investing in oil and gas because they are not sustainable energy sources? These three ways are strategies for sustainably investing in them — since you’re putting money into renewable, sustainable sources as well. These methods can also provide a boost to your pocketbook as oil demand is expected to grow slowly until 2021, while renewable energy will provide much more of the energy pie.