A ‘Musk-ed’ Affair: How clean energy decisions will drive investments of the future

If there’s one man that’s always in the news, it’s Elon Musk. By design or mistake, the multi-billionaire makes headlines consistently. On Wednesday last week, he announced that leading electric automobile company, Tesla, would no longer accept bitcoin as payment for its automobiles, citing concerns that the cryptocurrency utilizes fossil fuels for its mining.

According to Musk, “We are concerned about rapidly increasing use of fossil fuels for bitcoin mining and transactions, especially coal, which has the worst emissions of any fuel.” He further stated that the company was looking at other cryptocurrencies that use less energy and contribute less to carbon emissions.

Expectedly, the value of bitcoin dipped following Musk’s announcement, taking it from $54,700 per coin to as low as $46,000, with many people making whopping losses. While many have criticised Musk’s decision, citing his recent purchase of $1.5 billion worth of bitcoins in February and condemning his about-face, as a move for market dominance and other personal factors as opposed to the environmental concerns he has stated, Musk’s decision has in any event significantly upended the cryptocurrency market, as will similar environmental concerns in other markets in coming days.

Recently, the investment market has seen an increase in demand by investors for products that have a positive Environmental Social and Governance (ESG) outlook. In a press release earlier this year by Acting Chair of the US Securities and Exchange Commission, Allison Herren Lee, she said “Not only have we seen a tremendous shift in capital towards ESG and sustainable investment strategies, but ESG risks and metrics now underpin many traditional investment analyses on investments of all types.”

In the press release, she indicated that climate change and ESG issues were at the forefront of the SEC, particularly as these issues had begun posing significant risks to investments. As such, climate and ESG disclosures have now become mandatory. This, in no small way, is driving how companies – particularly large and listed companies – do business.

In the past, adopting good environmental policies were simply for the sake of looking good in the news, but now, it is more than that as bottom lines are starting to rest on the ability to ensure energy efficiency, reduce fossil fuel use, introduce environmentally sustainable practices and properly mitigate climate and ESG risks.

Some may debate that such decisions can only happen in the US market, but it is inevitable that market moves in the largest capital market in the world will trickle down to emerging markets like ours eventually. Also, the EU’s clean energy agenda, as well as the US’ reinvigorated leanings towards clean energy, is equally defining investment across the world. The loss that followed Musk’s announcement for bitcoin is a primer to what clean energy decisions can do to business models going forward.

Critics of the clean energy advocacy have argued that most pledging by large companies, especially Big Oil, to achieve net-zero is simply greenwashing, a concept that refers to draping dirty fossil fuel activities with a public face that is plastered with environmental sustainability. While there is some possibility that a number of these companies are greenwashing, it would be extremely market-obtuse to deny the impact these statements and publications are having on investment behaviour, added to the fact that many of these companies, as they continue to pursue fossil fuel agendas, are also shoring up major investments in and providing financing for clean energy initiatives.

It turns out that the next move for Musk will be to find a cryptocurrency that employs cleaner energy utility models – as such, an opportunity has presented itself for another cryptocurrency to lead the market. Had bitcoin been paying attention to recent newsfeed expressing concern about its energy use in mining the currency, it would have worked to innovate around its processes. This is a pointer to the importance of watching the market. According to one Professor of Economics at the University of New Mexico, “the amount of energy used to mine bitcoin has historically been more than [electricity used by] entire countries, like Ireland.”

It would be recalled the Musk recently offered $100 million for anyone who could come up with a technology for carbon capture. Much like a bounty hunter, the multibillionaire has put his money where his mouth is and one does not need a soothsayer to say what an injection of $100 million into the economy will do in driving investments in that direction.

The company that would eventually secure the prize would have its stock prices quadrupling in seconds and its investors earning significantly. Now investors are keenly watching clean energy and carbon capture companies to ensure they do not miss out. In sum, there is no gainsaying the fact that environmental and clean energy concerns will increasingly influence market growth in the coming years, even for emerging economies.

Credit: Nairametrics


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