Bubbles
The Green Bubble
Is green finance really sustainable in the long term?
After graduating from University at the age of 18, Ruth Reck joined the General Motors Research Laboratories in 1965. The only non- secretary female employee, Reck pioneered GM’s understanding of the Greenhouse Effect. GM responded by defunding her research, building opaque walls around her office (in an all-glass building) and funded climate denial programs.
I believe we are currently in a green bubble; the world knew about climate change long before NASA’s landmark testimony in congress, yet only recently have renewable energy and other ESG assets started to explode. Every third post on LinkedIn contains ‘ESG’, and this Clean Energy ETF more than doubled in 2020, while Tesla posted a 700% return despite a 5–1 stock split.
However, the frequency of Google Searches containing ‘clean energy’ is skyrocketing despite searches containing ‘climate change’ plummeting. Are these price rises organic or another get-rich-quick frenzy?
The bubble triangle offers a strong rationale for the existence of a green bubble, yet I will use the fire triangle analogy slightly differently. The oxygen of the fire is money and credit– oxygen is finite and once it dries up the fire suffocates (and the bubble deflates); high disposable incomes from pandemic savings and near-zero interest rates allow the fire to burn hotter and suck in even more oxygen (and money). Fuel is speculation. Social media allows for ideas to spread like wildfire; according to James Surowiecki,
‘one of the fundamental characteristics of a network is that once you’re linked in, the network starts to shape your views and interactions’
Why has society evolved from hiding people like Ruth Reck to making celebrities out of them? Because the more connected we are, the more flammable ideas become.
Heat is therefore marketability. The faster assets change hands, the ‘hotter’ they are. The WMD of this story is the ETF; the ability to buy into the clean energy trend with the click of a button with near zero friction is a bubble waiting to burst.
