Carbon tax: effects on green investments?

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It’s official: As of last week, legislation establishing the carbon tax was passed by the House of Representatives, and is expected to be passed in the Senate next month.

 

The $23-a-tonne tax will begin for big polluters from July next year, before converting to an emissions trading scheme with a floating price in 2015.

 

The government has said having a carbon price will encourage new investment in renewable energy, such as solar and wind, and more efficient use of electricity.

 

But what does it all mean for investors? Your Money Magazine spoke to Louise O’Halloran, executive director Responsible Investment Association (RIAA), to identify what impact the carbon tax will have on investments, and what to look for when building a ‘green’ portfolio.

 

Halloran said one goal of the RIAA is to suggest that government decisions have a material impact on investment decisions, and that shareholders should be asking themselves if their portfolio is exposed to areas affected by carbon pricing.

 

In terms of the effects on investments, Halloran said that as we enter a more energy efficient based economy, there will need to be a ‘reorientation towards investments in sustainable sectors’.

 

For those investors who see their portfolio as a reflection of the world we’re in, Halloran said some factors for consideration include:

  • Resource scarcity
  • Changing demographics
  • Increased urbanisations
  • Dependence on an aging demographic 
     

In terms of navigating so-called ‘green investments’,  Halloran said it’s about looking at the big trends that are coming our way, identifying the companies which may achieve great things and those who are planning for future trends.

 

Clean energy funds?

 

According to a recent AMP Capital Investors report, clean energy funds are increasingly being considered by investors worldwide.

 

Clean tech funds are designed to provide access to specialist funds which are involved in renewable power, energy efficiency, and environmental services.

 

However, Angus Dennis, senior investment specialist at AMP, said while there are some large Australian companies dealing in waste and recycling, we are yet to see a local broad clean tech industry with significant investment depth.

 

At this stage, Dennis said the clean technology theme is still most evident in overseas markets, but clean energy funds are a trend likely to increase in Australian markets.

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