If the stock market is an indicator of where our economy is headed, then renewable clean energy using sustainable resources is clearly our destination. While many other industries took a hard hit during the 2020 COVID pandemic, the renewable energy sector continued to realize an abundance of growth. It seems that the cost reduction for renewable resources and storage combined with an increase in capacity and usage plus the promise of a new administration with an agenda focused on achieving clean energy standards created excitement and energy for investors.
Special purpose acquisition companies (SPACs) are all the rage within the stock market right now. These organizations are shell companies with one purpose: to raise enough money through an initial public offering (IPO) to acquire another company. These are “blind investments” and thus much riskier than other options because there is typically little definition about which company the fund will acquire. In essence, investors are giving the fund a blank check to spend as the fund’s board sees best.
In the first 9 months of 2020, a whopping 100+ SPACs went public raising more than $41 billion. Of those, 7 were specifically targeted on clean energy and environmental, social, and governance (ESG) investments, raising a total of $2.1 billion. In September and October, another 4 filed paperwork and were expected to generate another $1.3 billion. This trend shows investors are willing to put up dollars for risky investments because they feel confident about the future of sustainable energy.
CNBC reported in December 2020 enormous growth in ESG investments. From 2018 to 2020, investments held in the United States as sustainably invested assets grew 47%–representing an increase of $12 trillion.
According to their article, Chris Phalen, research manager at the Forum for Sustainable and Responsible Investment had this to say about exchange-traded funds, community investment institutions, and alternative investment growth over that timeframe: “More specifically, he added, ‘the environmental criteria that have grown the fastest are climate change/carbon and sustainable natural resources; [notably,] sustainable natural resources, in particular, grew 81% to $2.4 trillion and was not even in the top 10 environmental criteria in 2018.’”
The Alussa Energy Acquisition Corp (ALUS) is an interesting example of how strong the shift to alternative energy is. ALUS is a SPAC that went public in November 2019. It offered some solid promises regarding losses to motivate investors and build capital with the goal of using the funds to strike an energy deal—a conventional oil industry energy deal. In fact, the Chairman of ALUS is James C. Musselman, founder of Caelus Energy (a Dallas-based oil and gas exploration and production company) and co-founder and CEO of Kosmos Energy (an American upstream oil company.) He’s an oil guy through and through. However, since ALUS went public, the oil industry has taken a nosedive. ALUS responded by pivoting to the clean energy industry. Instead of drilling for oil, ALUS decided to use its $850 million to be a 30% owner of FREYR to develop environmentally friendly lithium-ion-based battery cells as one of Europe’s largest cell suppliers.
Want to learn more about trends in the alternative energy industry?
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