When it comes to renewable energy, Warren Buffett’s Berkshire Hathaway is one of the largest investors in the US.
The company does not shout about its green credentials from the rooftops, but it is making substantial progress in revolutionising the energy grid across North America.
The billionaire investor can see in which direction the world is moving. And so can I. That is why I would follow his actions and buy SSE (LSE: SSE).
Warren Buffett and green energy
Buffett’s Berkshire invests in renewable energy through its Berkshire Hathaway Energy (BHE) business. This division has invested tens of billions of dollars in wind and solar farms across the United States.
Unlike other renewable energy investors, Buffett is not particularly interested in speculating on high-growth or unproven technologies. He is looking for a suitable return on his investment. BHE can offer just that as it expands its green energy arm, and I think SSE can replicate the same approach for my portfolio.
SSE is already an established utility producer in the UK. It has an expansive footprint of energy generation and transmission assets across the country. It is looking to grow this footprint further in the years ahead by investing billions in new renewable energy developments.
Other companies are using the same approach, but where SSE differs is that this business has been an active electricity generator for decades. It has the skills, financial resources, and experience required to capitalise on this industry trend. Further, it can do so without taking any high-risk bets on the industry’s future direction.
Renewable energy champion
Despite its attractive qualities, this is a highly regulated industry. The company is also much bigger than many of the smaller, more nimble competitors trying to grab market share. Therefore, competitive forces and regulatory headwinds could hold back the firm’s expansion plans in the years ahead. The current UK energy crisis may also throw up some obstacles for the business to overcome.
Even after taking these challenges into account, I believe the corporation is heading in the right direction overall.
What’s more, unlike other companies in the space, including Buffett’s Berkshire Hathaway, shares in SSE offer an attractive dividend yield of 5.4% for the year ahead. Although I should caution that this yield could come under pressure if the firm has to ramp up investment or reduce expenditure to meet rising interest costs.
Acquiring SSE for my portfolio will help me copy Buffett’s approach for investing in green energy. I own shares in Berkshire Hathaway, allowing me to invest alongside the billionaire investor and his expanding renewable energy presence.
As the energy transition accelerates, I believe these two investments will allow me to capitalise on the changing face of the energy industry without taking on too much risk, or speculating on unproven companies and technologies.
Rupert Hargreaves owns Berkshire Hathaway (B shares). The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
This post was originally published on Motley Fool
