Hi Guys,
Like Edmond, I don’t have a horse directly in this race. I select the mutual funds that I own without a Socially Responsible Investing (SRI) criterion. My uniformed overarching belief is that any additional constraints imposed in the selection process reduces the candidate fund list, and could potentially harm performance.
Thanks to the excellent reference that MFOer LewisBraham provided, the accumulated research indicates that my fears were imaginary. In that report, the authors conclude that 9 academic studies find neutral or mixed performance results, and even one instance of outperformance. The models suggest that outperformance is a doable goal from a theoretical perspective, but that optimistic assessment is not executed practically by fund managers. See page 6
1 for these conclusions.
So, adding a SRI criteria in the selection process does not necessarily hurt returns, although, as in all investment decisions, it must be executed prudently. It might not do an investor any good, but it will not break the back of his portfolio either.
I have a nearby neighbor who actually worked on a solar farm in the late
1970s. He is not a fan of these farms. At that time efficiency was poor. The farm was located in the Southern California desert region. His negative anecdotal assessment was not base on the relatively poor energy conversion efficiency, but rather on the excessive water requirements to keep the solar panels clean. That solar plant has shuttered its panels and has been abandoned.
Solar panel efficiency has improved remarkably since those early days. But even after 40 years and countless tears from working the problems, our primary energy sources have not changed very much. How much? Here is a Link to a superior summary generated by the International Energy Agency:
http://www.iea.org/publications/freepublications/publication/keyworld2014.pdfI invite you to scan this informative report. On page 7, the document shows the world’s Total Primary Energy Supply (TPES). The presentations graphically display energy consumption from the early
1970s to 20
12. A pie chart comparison of the energy contributors in
1973 and in 20
12 allows a rapid assessment of trends.
After decades of resourceful trying and skillful engineering, coal, oil, and natural gas remain the world’s primary energy sources. These 3 sources still provide over 80% of the fuel shares. Meanwhile, in the “other” category (geothermal, solar, wind), its share of the energy marketplace has advanced from 0.
1% to only
1.
1% over this 4 decade timeframe. This is not a brave new world signal. Progress in the “other” category is painfully slow.
There will be no eureka energy source moments in the near future. The fuel sources that govern the marketplace today will also be major factors for decades. The data show that coal production has steadily risen in the last 4 decades. These “other” sources have been experimentally explored for decades and are now respectably mature contributors. Don’t anticipate major innovations or efficiency improvements.
For example, solar photovoltaic cell efficiency can be significantly enhanced (to numbers approaching 30%) by using rare element materials like gallium arsenide. But that is not likely to happen. Why not? Rare element materials are extremely costly, and more importantly, universal scale limitations exist because rare element materials are “rare” (what a shocker).
There is some hope that thin-film gallium arsenide might prove doable. Let’s hope so. At this moment Gallium arsenide costs
1000 times more than an equivalent product made from silicon. The current goal is to reduce that differential from
1000 to
100. That’s still a long way from home.
The International Energy Agency report also shows consumption and production data on a country-by-country basis. Additionally, the document provides future energy projections that just might be useful when making an investment decision. For those of you considering energy investments, this referenced report just might give you an edge.
Progress in the energy field will be made, but only slowly and with many missteps. That’s science. In that context, keep John Maynard Keynes cautionary warning in the forefront: “Long run is a misleading guide to current affairs. In the long run we are all dead.”
Good luck and good research to all MFOers.
Best Wishes.
