Vijay Kumar Gaba

 Besides digital transformation of global economy, sustainability is the other theme that had dominated the investment strategies in past three years. The global energies have remained focused on enhancing the role of digital capabilities in our day to day life, and making the growth sustainable in terms of the pressure on natural resources and dispersal of harmful waste in the environment.

Scrolling through my social media timelines, I gathered some interesting instances of “sustainability” theme dominating the investment discourse.

·         Market capitalization of Tesla Inc., the US company making electric cars, among other things, has topped market of top 10 global auto makers; even though it’s annual revenue is about US$28bn (vs. Toyota revenue of US$572bn).

·         The stock price of Orsted A/S, a Danish largest energy company in Denmark and world's largest developer of offshore wind power, has risen by 275% (vs S&P500 growth of 36%)

·        Zhong Shanshan, the Chinese promoter of Nongfu Spring (water bottling and selling) and Wantai Biological (vaccine manufacturing) surpassed Oil Refining Moghul Mukesh Ambani and Oil retailer Jack Ma, to become the richest person in Asia.

·         Markets celebrated the victory of “climate change hawk” Joe Biden with London Stock Exchange’s FTSE making an all-time high, despite the country (UK) facing serious healthcare emergency and fresh lockdown.

In Indian context, stocks of companies like Borosil Renewable (PE 203x, Market Cap 3x Revenue); Suzlon Energy (Loss per share -2.95, Market Cap 2.6x Revenue) and Adani Greens (PE 9956x and Market Cap 67x Revenue) have been prominent amongst the most poplar shares in past one year.

It is evident that the stock markets, as usual, have embraced the trend enthusiastically, just like a toddler would embrace a new toy. It is very difficult to separate the toddler from his new acquisition. He/she would eat, sleep, play and do everything else with the new toy in his/her hand. Invariably, the alienation would occur only when a new toy is presented to the child or the old toy gets broken very badly.

Remember, the toddlers who fell in love with Suzlon & Inox Wind (wind energy)’ JP Power (Hydro Power); Himadri Chemical (Lithium Batteries) etc. are still nursing their wounds (emotional and financial).

Just to set the record straight, personally I am a huge supporter of the sustainability effort. I strongly believe that these efforts will create tremendous investment opportunities in next one decade. These opportunities need not come necessarily from the clean energy or producers of natural products. Many of these opportunities shall come from the existing businesses adopting sustainable methods, and thus improving their productivity and acceptability. As a tiny investor, I do not have resources to analyze the risk involved with businesses focused on new technologies and products. I would therefore focus on established businesses adopting new technologies and methods to become sustainable.

Some examples of such opportunities include – large FMCG companies becoming water and carbon neutral; large IT companies adopting solar energy and work from home as normal business practice; textile companies using natural colors.