Garvin Jabusch, Co-Founder and Chief Investment Officer, Green Alpha®Advisors, LLC
Where do you see opportunities for powerful, effective investing today?
Mr. Jabusch: You know, the economy of the 19th and 20th centuries got us a long way, propelling us to where we are today. But it is equally true that that legacy economy is fraught with systemic risks, not the least of which are the worst effects of climate change and global resource scarcity. Particularly now that there are 7.3 billion of us, with many enjoying rising affluence and standards of living, our economic activities, for the first time in human history, can and do have real impact. So unless we want our own self-caused biggest threats to come home to roost, it is time or even past time to change the way the economy works. And we at Green Alpha Advisors think the best place to start that process is to change where capital is deployed. Because where money is invested in this world is where everything happens. And as long as we remain invested in the fossil-fuels based legacy economy, we’re going to get increasingly strong storms, rising seas, diminishing biodiversity, and all the other risks of an increasingly warm planet.
So, where do we see opportunity? Well, at its heart, our approach to investment management is deceptively simple: don’t invest in the causes of our primary systemic risks, notably fossil fuels, and do invest in the solutions to those risks. For every function provided by the legacy economy, we believe there already is or soon will be a sustainable economy equivalent, often far better than its legacy economy predecessor. So we strive to build a portfolio of next economy analogs for legacy economy functions. In addition to hopefully serving and advancing the cause of sustainability, this also turns out to be an effective equity growth strategy because it means investing in disruptive innovation and also in rapidly advancing economic efficiency, meaning getting more and more dollars out of less and less inputs. Which is important, because that, in turn, allows us to have less and less impact on our underlying ecosystems, all while generating wealth.
This approach to economics and investing can become a sustainable, virtuous cycle. We believe we live in a time of nonlinear change, and the innovations emerging now will allow us to have great standards of living, while also giving our underlying ecosystems a chance to begin recovering. This is what we envision when we use the term “Next Economy.”
What sector has had the most significant impact on the renewable energy landscape thus far? Why?
Mr. Jabusch: Solar, mainly solar photovoltaic (PV). People often ask us, “When will solar or other renewables reach grid price parity?” Well, the fact is that solar electricity is at least as cheap as other sources in 79 countries (depending on how you measure “grid parity”), and in many U.S. states. We’re seeing a burst of PV research leading to constant innovation driving up efficiencies in an effect some are calling “solar Moore’s law.” And unlike fossil fuels, solar will only continue to get cheaper and cheaper as scale and improving technologies continue to advance. Cheap solar panels combined with cheap storage will spark what Barclay’s has called a grid “defection spiral” that will pry away utilities’ grip on power monopolies to the extent that Barclay’s has downgraded the entire US electric utility sector. Meanwhile, the IEA has guessed that ditching fossil fuels for renewables would allow US$115 trillion in fuel savings in just a couple of decades. We can’t overstate how emancipatory this is for world economies, and for growth with far fewer consequences.
Honestly, the very comparison between fossil fuels and solar will seem quaint before long, even with the recent—and no doubt temporary—declines in the price of oil.
Debates about environmental issues and solutions are common among the public and governments. What role do you think investors could play in establishing active working relationships with all stakeholders to effectively address environmental challenges?
Mr. Jabusch: To advance to an economy that will allow us to maintain and improve our standards of living while simultaneously reducing our planetary impact to the point where our underlying ecosystems can begin to recover will be an enormous transition from where we are now. The way forward is to drive economic efficiencies so far that we can get more and more economic output from fewer and fewer material inputs, to the point that our economic activities have a negligible footprint on Earth’s ecology. This will rest on our ability to accomplish two key things: power ourselves entirely with truly renewable energy and perfect waste-to-value economics.
First, power. The economic output of any economic or natural system is directly governed by the amount of energy available to that system. In ecology, it is an axiom that systems with greater access to energy will grow the fastest, become the most productive, and generally thrive the most—until they reach a growth point where they begin to deplete the resources they depend on. So we know that to thrive in economic terms over a very long period will require access to massive quantities of energy, but from sources that don’t result in disruptive threats or that are limited in quantity. Today, this means solar. Other renewable sources will be important, too, but solar is the clear favorite in terms of cost, deployability, and effectiveness. The amount of energy that reaches Earth from the Sun is sufficient to power any scale economy and is inexhaustible in terms of the span of a civilization.
Next, waste-to-value economics. Believe it or not, even in 2014, most of the materiel we as a global economy use ends its lifecycle un-repurposed, in landfills, derelict in situ, or worse, in the oceans. This, in turn, requires us to go back to primary geological sources when we need to make something new, meaning we impact Earth afresh when there is ample materiel already extracted that can be repurposed over and over, theoretically indefinitely. So when we talk about a waste-to-value economy, what we mean is almost perfect recycling—extremely efficient use of resources already in the economy, and more and better repurposing of those. Crucially, this will require an infrastructure upgrade to allow for identification and recapture of nearly everything in a municipal or other kind of waste stream. Further, reclamation processes will have to be automatic and passive, and not rely on individual peoples’ behavior. This is because human intermediation in these processes is slow, time intensive and inefficient, and because, no matter how well intentioned most folks are, there will always be those who choose not to participate, or if they do, who will do it wrong (be inefficient).
Additionally, we note that renewable energies and waste-to-value are not mutually exclusive topics. Fossil fuels, for example, are the ultimate non-renewable resource both as energy and materiel since they are consumed entirely upon their first use and can, by definition, never be repurposed. By contrast, resources extracted from earth or repurposed from existing items used to make solar PV modules will generate energy for 20 years or more before needing to be recycled into new modules. Thus, solar is dramatically more efficient than fossil fuels in terms of both duration of use and total amount of energy derived per unit of resource, and also in terms of end-of-life repurposing.
A key limitation on the path to a sustainable economy has been the intransigence of the legacy economy (an economic and environmental system that depletes scarce resources and does not allow us to live and thrive on the planet indefinitely) and its influence on policy. As long as our issues are framed, as they have been up to today, in terms of what is politically feasible (as opposed to what science prescribes as necessary), then the proposed solutions will always be incommensurate with our primary problems. That is, things will probably have to get worse before they get better; necessity again becoming the mother of invention, hopefully before a major irreversible tipping point for civilization. As the magnitude of our problems accelerates, and awareness of this worsening becomes more popularly recognized, the political tide will turn and the products, services, operations, and approaches offered and practiced by our portfolio constituent companies will come under increasing demand.
I suggest that direct policy action, stuck as it mostly is in traditional, retrospective-oriented thinking, in the short term will provide only a very small, and on its own insufficient, contribution towards solving inequality and our other primary systemic risks. On this basis, I believe that investors can not only contribute to a meaningful dialog with all stakeholders, but can lead it. In providing both conduits of capital to issue-solving ideas and in giving individuals and institutions alternatives to legacy portfolios, sustainability focused asset management can be first to demonstrate the viability and success of sustainable economics.
Garvin Jabusch is cofounder and chief investment officer of Green Alpha®Advisors, LLC. He is co-manager of the Shelton Green Alpha Fund (NEXTX), of the Green Alpha Next Economy Index, and of the Sierra Club Green Alpha Portfolio. He also authors the Sierra Club’s green economics blog, “Green Alpha’s Next Economy.”
Prior to co-founding Green Alpha Advisors, Garvin’s duties involved responsibility for all aspects of the management of the Sierra Club Stock Fund and the Sierra Club Equity- Income Fund at Forward Management, LLC. This included portfolio management, manager performance evaluation, research, marketing, sales, operations, and relationship management. In addition, Garvin also directly co-managed the Sierra Club Stock Fund (SCFSX).
Garvin previously served as vice president, strategic services, at Morgan Stanley, where he contributed to various global projects such as the integration of the bank’s European acquisitions and the spin-off of Morgan Stanley Online. Garvin also served as a product manager at Morgan Stanley, managing the launches of wireless trading and after-hours trading for the firm’s clients. After-hours trading on MarketXT marked the first time retail investors in the United States had the opportunity to trade in the after-closing markets. His other experience includes trading, mutual fund sales, and research and analysis.
Garvin studied at the PhD program in physical anthropology and archaeology for five years at the University of Utah. During the course of this work, he wrote and contributed to many environmental impact studies, the largest of which was an assessment of a natural gas pipeline extending from western Wyoming to southern California. Garvin was also a field director for the American Expedition to Petra, Jordan, for two excavation seasons. Many artifacts discovered by the expedition can now be seen in the Jordanian National Museum. Previously, Garvin worked variously as a white-water rafting guide at Grand Canyon, Arizona, and as an EMT.
Garvin holds an MBA in international management and finance from the American Graduate School of International Management (Thunderbird). Hw has appeared numerous times on CNBC, Bloomberg, the Wall Street Journal, Forbes.com and other media outlets and publications, commenting on sustainability-oriented and cleantech investing.