Like Bo Jackson and others, Angelo Calvello is a “multi-sport athlete”. The early and outspoken advocate of portable alpha and originator of the term “alpha-centric” has now established his thought leadership credentials in the emerging field of green investing. He is the author of the forthcoming book “Environmental Alpha” (Wiley: 2009).
Calvello was one of several speakers addressing a standing room only crowd of nearly 400 people at Bloomberg’s New York headquarters at the inaugural CAIA Green Investing Symposium (organized by the New York chapter of the CAIA Association, and co-sponsored by the New York Society of Securities Analysts, the Connecticut Hedge Fund Association, and the Yale Center for Business and the Environment).
More than just a social issue, he describes climate change as the “mother of all investment themes.” In a refreshing departure from the usual (albeit important) socially-grounded view of climate change, he remained agnostic with regard to even the dirtiest of energy technologies (e.g. coal). Instead, he focused his remarks today on how to generate returns given the realities of climate change.
The drivers of those returns, according to Calvello, can be categorized as science, economics, policy, and technology. He divides “environmental investing” into 5 categories: clean technology, sustainable property, LULUCF (Land-Use, Land-Use Change, and Forestry), carbon, and water (although he acknowledges that water does not have a direct effect on green house gasses).
So what is environmental alpha? Although environmental investing may show potential for outsized returns in the future, it could all just be environmental beta. But Calvello argues that such a new field exhibits inevitable market inefficiencies. He points to the complex choice of a wind farm location as an example of the type of investment that relies on emerging and uncommon knowledge.
Reducing dirty energy use by 50 percent before 2050 (as global policy makers have discussed) would require about $45 trillion dollars – or about 1 percent of GDP per year. And that, according to Calvello is the heart of the investment opportunity.
Click here to read the complete article from AllAboutAlpha.com.
