Financial advisors across the country, take heed: Extended periods of continuous economic growth and favorable market conditions frequently give rise to flawed schools of thought for personal financial planning, the defects of which are only fully revealed when the inevitable market downturn occurs. 

The global coronavirus pandemic-driven market pullback is proving to be no different, and this time around, the downturn is revealing the fundamental flaws of the Financially Independent, Retire Early (FIRE) movement, which came of age during the most recently ended decade-long bull market. Ten years of rising markets spawned a generation of investors who came of age after the financial crisis, and well after its many preceding downturns, from the telecom bust of the early 2000s, to the dot-com meltdown of the late 1990s, to say nothing of the 1987 stock market crash.

First, some context: There are variations, but the general approach for FIRE movement adherents is to trim down living expenses to the bare bones, in order to maximize savings while in their 20s and 30s (a frequent metric is to save 70% of annual income). For FIRE movement participants, the goal is to accumulate a nest egg in the low millions before retiring early and living off a combination of small withdrawals and investment income, supplemented sporadically—only as needed—by “gig economy” freelance work.

Unfortunately, the FIRE movement is not surviving contact with reality. That’s because this school of thought assumes that equity markets will continue to rise, fixed-income securities will provide an income-generating backstop against downturns and—when possible—ownership of rent-yielding residential property provides a further reliable cushion for the future.

The coronavirus pandemic and the resultant stock market rout, the Fed’s emergency interest rate cuts compressing bond yields and a potential rent moratorium in multiple markets together comprise a black swan event that discredit many of the FIRE movement’s core assumptions.

What pandemic economics is demonstrating in brutal detail is the need for high-quality investments in industries that are insulated from market shocks and offer durable income streams. Green power infrastructure is one alternative asset class that offers, well, a true alternative.

Strong Fundamentals
On a macro level, sustainable power generation is continuing to grow, despite recent sharp cuts in the price of fossil fuels, courtesy of Russia and Saudi Arabia going eyeball-to-eyeball on production disputes. Indeed, a 2019 report by BloombergNEF estimated that by 2050 solar and wind will make up 48% of global power generation, up from just 7% today, and overall demand for electricity will rise by nearly two-thirds over the same period.

Meanwhile, as the components whose costliness once limited the potential of solar and wind—namely panels and turbines—improve and gain scale, the economics of renewable generation are fast reaching parity with more conventional generation methods.

From an operational perspective, solar and wind farms typically ink decades-long offtake contracts with investment grade municipalities, utilities and businesses, ensuring that there will be steady, consistent demand for their power and long-term recurring revenue.

Like Other Asset Classes, But Different
With a defined term and consistent periodic income, green power infrastructure assets share some attractive features with bonds as an asset protection strategy. Where assets such as wind and solar differ is that they present an opportunity to add value mid-stream and allow investors to gain more market-agnostic growth without taking on substantially more risk. One example: the life cycle of a wind farm can easily be extended by decades by replacing older, less efficient turbines with newer designs, an approach called repowering.

Meanwhile, green power assets have similar characteristics to real estate investments, such as long-term cash flow and insulation of public market volatility. The key difference is that they’re less susceptible to the boom-bust cycles that real estate is. Power will continue to grow in demand as long as economies around the world expand.

A More Diversified, Steady Approach
One lesson of the past several weeks is that there are generally no short cuts to saving for retirement and other life goals, and, of course, that investing is not a game for the faint of heart.

More tangibly, recent market shocks expose the FIRE movement for what it is: a school of thought that relies on very rosy assumptions that leaves little margin of error or time to recover from relatively minor bumps in the road, much less major downturns such as the one we’re currently experiencing.

Financial planners and advisors working with investors—especially investors who have more runway to go before retirement—should counsel their clients to take this market inflection point as a moment to look at a more diversified, steady approach. Green infrastructure investments can play an important role in protecting assets and generating long-term income in a post-FIRE environment.

David Sher is Co-CEO for Greenbacker Capital, an investment firm focused on the renewable energy space.