How you can invest in the clean energy transition | 2023 investing inspo with Global X

Maddy: [00:00:22] Hello and welcome to You're In Good Company Summer Series. I'm Maddy Guest and as always, I'm in some very good company with my co-host, Sophie Dicker. 

Sophie: [00:00:32] Mads, it's fair to say that 2022 has been a very volatile year for markets. And it's safe to say that we've learned a lot of lessons over the past year.

Maddy: [00:00:40] I only wish we had a crystal ball because we would have made some seriously good investment decisions if we had known what was coming. 

Sophie: [00:00:46] So we thought for you guys in 2023, why don't we create our own crystal ball.

Maddy: [00:00:53] Way of bringing you industries to watch in 2023 as voted by you four episodes over four weeks of Aussie summer. 

Sophie: [00:01:01] Or I guess a Winter series if you're joining us from the Northern hemisphere, Welcome. 

Maddy: [00:01:05] We are going to be exploring some of the most talked about industries that just might have their moment on the ASX this year. 

Sophie: [00:01:12] This series is brought to you by Global X, a powerhouse ETF provider in the local and international market, offering investors best in breed products backed by industry leading research.

Maddy: [00:01:22] Talking about one of our favourite topics today, that is I guess broadly the shift to sustainability. But today specifically we are going to be talking about clean energy infrastructure. 

Sophie: [00:01:32] Yeah, it's one that we have spoken about before personally and it's such a cool space because it's like everything has to transition if we're going to reach clean energy goals. But it's also a bit of a like foreign investment space because it's kind of hard to know where to invest, I guess. 

Maddy: [00:01:47] Yeah, I think one of the reasons I like this topic so much is because it gives you the opportunity to align your investing with your values and to actually put your money into something that you feel like is going to do good. 

Sophie: [00:01:58] And I also feel like I, in this space have traditionally thought that you don't get, you know, a certain amount of gains with these investments. But when we had Kamille at a live event where we spoke about sustainability, she showed us a couple of indexes, including this Deloitte index, which actually showed that if you made your investments in this green space over the past couple of years, you haven't outperformed the index. You definitely haven't been hindered by investing in this space. It's just really cool. 

Maddy: [00:02:24] Yeah, and I think investing is one of those ways that you can actually have a real contribution to this space. Like, you know, there are lots of small things you can do, like taking your what are. 

Sophie: [00:02:36] You are taking your coffee cup. 

Maddy: [00:02:38] Or, you know, going vegan and things like that. But actually if you invest your money or invest your superannuation, that has a much greater and more influential impact than all of those things combined. There is a book that I've been really wanting to read actually called Superpower by actually having to explain it. 

Sophie: [00:02:57] Yeah, I don't get it. I was like, No. 

Maddy: [00:02:59] It's by Ross Garnaut and it's all about Australia's low carbon opportunity. So it talks about how Australia has unparalleled energy resources and how we have a real opportunity to become an economic superpower in like a post carbon world map from my summer reading list, although it sounds a bit. 

Sophie: [00:03:17] Death does sentence, but definitely one I'd want to read. 

Maddy: [00:03:21] So the other day we were doing some research and you are actually using Siri. 

Sophie: [00:03:26] I raise that guy's Siri is a bundle of knowledge, like she knows what's up. 

Maddy: [00:03:33] Well, I thought that we could use it now, so hold on. Let me just grab my phone. Hey, Siri, can you tell me about the energy sectors impacts on the environment? 

Siri: [00:03:43] The energy sector is the world's largest source of greenhouse gases, totalling 73% of total emissions. 

Sophie: [00:03:51] So I told you she's got really good facts. 

Maddy: [00:03:54] I actually love it. I'm going to use it more often. 

Sophie: [00:03:57] I know. Okay. Going to that facts though. That's insane. 73%. 

Maddy: [00:04:02] Yeah. Such and such a good opportunity for transition to change. 

Sophie: [00:04:07] So pretty much what we're saying is right now the world heavily relies on greenhouse gases for our energy. So we've got our coal and gas. And I think at the moment we've really seen that there's a heavy reliance on that stuff because if you look over in Europe and everything that's happening with Russia and Ukraine, ladies have been like, Oh my God, we have our reliance on this one source of energy. And so I feel like where we're at right now is this little inflection point of like, how do we actually change to renewable energy? 

Maddy: [00:04:36] So currently our energy sector is producing most of the world's greenhouse gases. How do we transition? 

Sophie: [00:04:43] Oh, it's the age old question, Mads. The age old question. But to be honest, it's to move to renewable energy. We need to have like a certain infrastructure there to house that. So for example, if we want to use solar, we need to have solar panels if we want to use win win in. Have wind turbines, etc.. So one of the big things that we are going to require is actually a lot of metals. So a lot of like copper, aluminium, lithium, all these like special minerals that are actually going to help us build this infrastructure.

Maddy: [00:05:16] Which I guess makes sense why Australia is so well positioned for this, right? We do have a lot of those metals. You know, we do have a lot of those metals. 

Sophie: [00:05:25] Yeah, we do, which is why we're so fortunate and why we could be that. What you said superpower makes sense in this argument, but actually when I was reading about this, I actually found it so fascinating. I feel like I didn't really know. But for example, a coal power plant requires one tonne of copper to produce a megawatt of energy while an offshore wind farm requires eight tonnes of copper or a solar farm requires 28 tonnes to produce this same amount of electricity. So we're going to need a lot of these metals to transition. 

Maddy: [00:05:57] Yeah, you actually sent me this article and talks about how in order to just make the Paris Agreement, which is sort of like that goal that we've got in mind for decarbonisation, the demand for clean energy metals would be four times by 2040 and that's not that far away. 

Sophie: [00:06:12] So that fact to me sounds like an investment opportunity. 

Maddy: [00:06:17] Okay, so if I'm going to give you one minute and I want to challenge you to sell me on your three most convincing points of why you think this trend, clean energy infrastructure, is going to take off. 

Sophie: [00:06:29] Okay. 

Maddy: [00:06:30] Are you ready? 60 seconds on the clock. Let's go. 

Sophie: [00:06:35] So firstly, politicians are starting to take the transition seriously. As I said before, in Europe, at the moment, they are really struggling because they have this huge reliance on gas. I actually have a friend who lives in Berlin and she can't turn on her heater at the moment because it's so expensive in the middle of their winter. So politicians are getting, you know, the heat from their consumers, their people that they need a change in Australia. The government said that they are going to push to invest in the green energy sector because they are reducing Australia's emissions back to 43% by 2030. So first point, politicians are starting to say that they need a change here. Second point is that there is reallocation of capital towards sustainable companies, which is driven by you and me and whoever is listening. So the Australian Government has committed 76 billion in investments to upgrade the electricity grids and so batteries to maximise rooftop power prioritise an electric vehicle strategy. And this is all because we are investing and putting our money into companies that have a sustainable focus. So the second point is that the government is reallocating money towards this area, but so are the consumers, and that's going to push a tailwind for the sector. Finally, Maddy, are you ready for the last point? 

Maddy: [00:07:52] You've got 20 seconds. 

Sophie: [00:07:54] Wow. There is a supply deficit of materials. So, for example, those green metals that we were talking about, not all of them are in finite source. Is that right? Is that a word? I know. Finance. 

Maddy: [00:08:08] That is. Yeah. Infinite. Yeah. 

Sophie: [00:08:09] Infinite, infinite, finite source. So I think if you are really looking to invest in this space, we're actually at a really lucky point because there is an abundance. And I think, you know, over the past year, for example, we've seen a huge increase uptake of lithium and people are talking about how that supply is not going to last forever. So I think if you're going to add to the investment lens at the moment, it's like where can you put your money now, where you're going to see some benefit in the future? And potentially great metals is a space where that's going to happen. 

Maddy: [00:08:42] I love it. Well done. I think you might have gone slightly over 60 seconds, but I will allow it. I think that all makes so much sense to me. Which I guess begs the question, you know, what are the barriers? Like, why isn't this happening already? Why aren't we seeing a huge boom in this space? I can feel like we we kind of are. Maybe we're starting to, but what I guess do you think is stopping us from transitioning right now? 

Sophie: [00:09:07] Yeah, well, one of the big ones is the lack of infrastructure. Like particularly in Australia. It is going to cost so much money to build up a lot of the stuff that we need. 

Maddy: [00:09:19] Yeah, I guess it's like literally just logistical issues at the moment in that even if companies or people do want to transition, like we don't actually have, like you said, the infrastructure. I was reading the other day that lithium mines take five years to open and they typically cost $100 million. So I guess that leads us to the next point in that, you know, it just takes time. Like this is not a change that we can make overnight. Like it is not just a decision of everyone deciding one day that they are going to power their homes through solar. It is businesses investing time and effort into this transition. It is businesses potentially having to change the way that they actually make money. Yeah, it's schools, it's transport, like it is a massive shift. And the reality is, that that just takes time. 

Sophie: [00:10:05] And you've got to think as well. Right now we're in a bit of a we're not in a recession, but we're in a downturn with our economy. And so people don't necessarily think to put their money into things that are expensive. So, for example, Sam and I were looking to get solar panels on the top of our where we're living at the moment, but it's just a huge expense. So we're already thinking about cutting down our costs for next year. Yeah, So it's it gets put on the backburner. 

Maddy: [00:10:29] Like us businesses, people. Everyone's paying a bit more conservative at the moment. So I guess that hinders sort of that speedy transition that we would all love. I think the other thing that comes to mind is like fossil fuels are a massive part of the Australian economy, whether they like it or not. You know, a lot of our exports are called to other countries and we make a lot of money out of that. So I think whilst obviously if everyone takes a step back, I think most people would say, yeah, it'd be great if we could all be completely powered by renewable energy. But at the end of the day the fossil fuels industry has massive influence in Australia and it makes us a lot of money. So I think there is also that almost disincentive which is countering all the incentives that are the bigger picture.

Sophie: [00:11:13] So we've covered the what, we've covered the why. After the break, we're going to jump into some ways that you can invest in the clean energy infrastructure and transition space. So, Mads, you put me on the spot before and you said, Give me three reasons. One minute or less. So I'm going to do the same. Back to you. I'm going to play a game for you. Okay. So I have written down a couple of the green medals that are going to be used in this transition. And I want you to guess what their current use is now, predominant use. And then, if you can, what you think their use will be in the green energy transition infrastructure. Okay. I'm going to start you off with easy lithium. 

Maddy: [00:12:06] Okay. Currently used in batteries. 

Sophie: [00:12:10] Yes. 

Maddy: [00:12:11] And future use. I do need sun in electric vehicle batteries. Thank you. That's probably going to be the only one I know. 

Sophie: [00:12:22] So one Covid. 

Maddy: [00:12:25] I can't use could not tell you. 

Sophie: [00:12:29] Mine is in aircraft parts. 

Maddy: [00:12:31] Okay. That is very nice. Yes, he was going to do that. 

Sophie: [00:12:34] No, but, you know, I found these interesting. 

Maddy: [00:12:36] So they are interesting to me. That and future use. 

Sophie: [00:12:39] Batteries as well. So for electric vehicles to run wind turbines. I did have a thing. I didn't look into it too much. But if Colbert makes aircraft parts, surely it could make like wind turbine parts, maybe because, you know, wind turbines. All right. What about aluminium cans? Yeah, beer kegs. 

Maddy: [00:13:00] Yeah, I guess. Like construction.

Sophie: [00:13:04] And then for the energy transition, they're going to actually be used pretty much across everything. So batteries, pots, construction of things, rails, whatever we need is a good one. [00:13:16][11.8]

Maddy: [00:13:17] When it comes to metals, I guess I'd never really thought much beyond lithium, which is such all like as about, say, hydrogen. Not a metal. 

Sophie: [00:13:25] Not a metal. Okay, I will do zinc. 

Maddy: [00:13:31] All I can do is sunscreen. 

Sophie: [00:13:35] Just because it's cold. Yeah, no, it's actually in car bodies and street lamps. Many of the things, by the way. These are just some certain things. Yeah, but they will be used in offshore or zinc will be used in offshore and onshore wind turbines. 

Maddy: [00:13:51] Very interesting. All right. What's your final one? 

Sophie: [00:13:55] Chromium. Oh. 

Maddy: [00:13:58] I got nothing. 

Sophie: [00:13:59] Used in stainless steel cutlery. So next time you're eating, you eating right now and I'm eating dinner, think about your cutlery. You got chromium is a fun fact, but that'll be use it in geothermal power plants. Oh, so when I was looking at all these, I just found it so interesting that things that I've traditionally thought of as mining elements, very dirty industry, is actually going to have a huge part to play in the clean energy transition. 

Maddy: [00:14:26] Yeah, we're we're having a conversation about this the other day and when we were doing some research about what you can actually invest in, in this space, we came across this grain metal mine is ATF, which we both found super interesting because I think it was definitely a space that, you know, outside lithium, which we've sort of talked about beforehand, which is quite well known, especially in Australia. It had it's being run late last year and earlier this year in terms of like stockmarket performance, I guess I hadn't really thought about other metals and how they actually might be really important for the grain energy transition. 

Sophie: [00:14:58] Yeah. Now this ETF is really interesting because it does cover a lot of the minerals. It's not just that what we were saying before lithium and I'll caveat this by saying, but there's a lot of like talking at the moment in Australian media about how lithium potentially has had its really good run and it might, you know, fall down a little bit in the next year. So it got me thinking because I do invest in some lithium companies that I want to diversify maybe across the metal space. Yeah, so this ETF is GMTL is the ticker and it provides exposure to global companies which produce critical metals for green energy, infrastructure and technologies, including like, as we said, lithium, copper, but also like nickel and cobalt. 

Maddy: [00:15:41] Yeah, very cool. What kind of companies does this one hold with any that you found interesting. 

Sophie: [00:15:46] Yeah. So one that I found really interesting was this one called I'm going to push the name Lynas. Lynas Rare Earth. 

Maddy: [00:15:53] Lynas.

Sophie: [00:15:54] Lynas, L Y N A S. You choose what you think, but it's a really significant producer of rare earth materials outside of China. So a lot of like, the grey metal space really does fall in like the Asia more the Asia region, but Asia Pacific as well. And this company is really cool because it's headed by an incredible CEO, Amanda Lakos, and she's a really big advocate for the transition to clean energy and clean infrastructure in Australia. So she's a very predominant voice in this space. And Lynas rare earths is one of the big holdings. So I thought it was like a cool company to look into because I'd never heard of it before. 

Maddy: [00:16:38] Nice. I think other areas that you know, could be very interesting. I've spoken about lithium ETFs before. There are a few of those on the market great way to get exposure to electric vehicles That I guess is a little bit different from your Tesla directly or your other sort of big car companies. 

Sophie: [00:16:55] Yeah, and I was going to say like you can honestly Google Search Lithium ETF and then like there's lots of them that you can compare and have a look at the holdings because you know, some of them don't have to. If you're worried about the volatility of Tesla and stuff like some of them don't hold Tesla. Yeah yeah look at completely different things. 

Maddy: [00:17:14] So another one that I've been thinking a lot about is solar panels. Yes. I think about if like our homes and how we as individuals are sort of going to be. Powering our everyday lives into the future as a part of this transition, like solar panels really comes to mind is one of those things that's going to be huge in that space, and hopefully we'll see more and more people sort of investing in over the next few years. 

Sophie: [00:17:37] I also hope the solar panel space is like an area where the government can incentivise consumers to use it. They definitely have, but I think as technology becomes cheaper and cheaper, they'll be able to give more. So it doesn't you know, it's not going to cost the world for you and me to put solar panels on our rooves and people, you know, for landlords and tenants and whatever else, like it's going to become more accessible. And I think that's an easy technology to kind of like potentially implement. But in saying that we need the infrastructure and the power grids. I think the best thing about this clean energy investment space is you can actually just find what really interests you and then do a Google search for the ETF that you want to invest in, because there's so many ETFs that cover clean energy, solar panels, lithium, like all those areas. So it's an exciting space and it's one with an abundance of options. 

Maddy: [00:18:29] Very exciting in day. Well. Soph, it is summer. It's a perfect time to get on top of your rating, listening, whatever you're watching. 

Sophie: [00:18:39] Lying, lying on a sunbed and not moving. Also, if you don't want to do anything. 

Maddy: [00:18:44] 100% recommendations, what have you got for me to say? 

Sophie: [00:18:47] I just said lying on a sunbed, but mine's actually a fitness app. I'm actually recommending a fitness app. So it's called Lane with Lily, and her name is Lily Sabry. She lives in Dubai, and I have been obsessed with this app for like three years. The reason I'm recommending it now is because I quit my gym membership a couple of months ago because it was costing me too much money. And I have just found this app an all in one. She's got hit, she's got Pilates, she's got yoga strength, and like she does little series that are like physical series. So they're like ten minute or 20 minute exercises. And so if you're looking to reduce your costs expenses in 2023, I found this app really good. She always does. So I think she'll probably do a like New Year sale and something like 30 bucks or 40 bucks for three months is super cheap and yeah, loved it. So Lane with Lily is the afternoon, Instagram is Lily Spray. 

Maddy: [00:19:45] I actually have been thinking often at this time of year kick the keep it Yeah is on sale as well. I was thinking about keeping an eye out for that. Often you can buy like a 12 month membership at quite a discounted price. Yeah, they'll do it this year, but hopefully. 

Sophie: [00:19:59] They also have that like February now have the five minute exercise fun. So it's like if you really busy but you need a mental refresh, so jump on doing 5 minutes, which is awesome. Yeah. What are you bringing for for some recommendations. 

Maddy: [00:20:11] I am recommending a book today is one that I am currently reading and very much enjoying. It is called 4000 Works by Oliver Backman. Yeah, 4000 weeks is the average human lifespan. 

Sophie: [00:20:23] Yeah, it's crazy. My house. I did tell me this once and I was like, that's like a lot of weeks. And then he was like. 

Maddy: [00:20:29] I think it's not many. 

Sophie: [00:20:30] Yeah, I know. It's so funny. That's what he thought. 

Maddy: [00:20:32] So basically it talks about how we need to try and stop optimising every part of our life, and it really resonated with me. We're both very sort of busy people and I feel like I'm constantly trying to think about how I can fit more into my day and how I can be more productive. But it really sort of gives a contrary view, which is, I think, why I'm enjoying it so much. It talks about things like how indecision is a decision in and of itself, and also the difficulties of choice. Spending too much time on your phone. It is a really interesting book, all the while staying very witty and entertaining. So highly recommend. 

Sophie: [00:21:07] So maybe a good rate going into 2023, resetting your goals and prioritising. I will pick it up eventually. I've got such a long list of books I need to be writing. 

Maddy: [00:21:19] Well, I think that brings us to the end of today's episode all about clean energy infrastructure. 

Sophie: [00:21:25] If you have thoughts on this space, because I know a lot of you do jump into our Instagram at YIGC podcast, let's DM and let's chat. 

Maddy: [00:21:33] As always, any questions. You can also post them in our Facebook group YIGC Investing podcast discussion group and it is a new year, a great time to set new financial goals and think about the year ahead. So if you have a friend that you think might enjoy this episode, we would love for you to share it then. 

Sophie: [00:21:52] Otherwise you'll hear from us next week after. Bye.