There’s a natural impulse to want to immediately begin to invest in companies that could directly benefit from this massive change—one that promises to affect so many aspects of our lives, says Chris Hyzy, Chief Investment Officer for Merrill and Bank of America Private Bank. But it will likely take businesses many years to see gains from widespread hydrogen adoption. Hyzy instead suggests that investors look to some of the sectors that will evolve between now and that future, which he breaks out into three connected areas.
1. RENEWABLE ENERGY
“Start with renewables that are already in place. That’s an opportunity set that should widen out,” he says. “We’re already seeing it in areas like solar, wind and fuel cell technology.”
“Then start to think about the next use of hydrogen as the cost curve comes down and that demand goes up,” Hyzy suggests. “That’s transportation through the use of fuel cell technology.”
3. INDUSTRIAL USES
Later in the development cycle for hydrogen produced with renewables, Hyzy says, “You can start to look at infrastructure and who the ultimate beneficiaries of that are. Clearly, it’s industrial use.” He expects that will happen at least a decade from now.
Finally, Hyzy stresses that the key is maintaining a long-term perspective and understanding that these types of large-scale changes can take years, even decades to play out. In addition, having a well-diversified portfolio is essential for both capturing emerging opportunities and helping lessen your exposure to any one investment or sector.
As always, be sure to speak with your advisor about the type of investments and strategies that are most appropriate for you.