How To Invest In A Greener Future
Many of us are concerned with investing for a more sustainable future.
After all, there’s not much point accumulating wealth if the world we live in is torn apart by environmental catastrophe.
Nothing screws with the value of investments like social collapse.
Fortunately, you don’t have to choose between investing in a way that will help the Earth and a way that will make you money.
There are plenty of ways to invest in a green future.
Renewable Investment Trusts
Renewable energy is one of the biggest and most successful industries focused on improving the environment.
Companies producing solar and wind energy are on the rise, with a government target of producing 30% of the UK’s energy this way by 2030.
Last year saw the first occasion on which the majority of the country’s electricity was provided from renewable sources. This shift is set to continue, with more offshore wind farms playing the most important role.
Several investment trusts have been formed specifically to invest in renewable energy.
Trusts such as Greenfield UK Wind and Bluefield Solar Income let you invest in renewables.
Renewables Obligation Certificates (ROCs) help by providing government-sponsored evidence of which companies are providing renewable energy.
Clean energy is perhaps the most important environmental issue facing the planet.
Clean enerhy really could save us from disastrous climate change, and this is an accessible as well as a profitable investment sector.
Environmental Investment Trusts
Some investment trusts have a broader environmental agenda, though there are currently only three of these based in the UK.
These are Impax Environmental Markets, Jupiter Green, and Menhaden Capital.
These funds invest in a range of different industries including renewable energy. Impax provides a useful example (http://diyinvestoruk.blogspot.com/2018/10/impax- environmental-markets-new-purchase.html).
It has invested in companies including a wind farm operator, a manufacturer of rechargeable batteries, and a company that makes machines for recycling plastics.
These investments can have a positive social as well as environmental impact. For example, Impax is invested in Trimble.
This company helpsing farmers to get better crop yields, which support the growth of struggling communities and can reduce the environmental impact of farming.
If you want trusts with more diverse holdings, these are the way to go.
Funds
Various investment funds and OEICs claim to offer the opportunity for green investment. The problem comes in assessing which ones to invest in.
Some funds take a “light green” approach to environmental investment. They filter out the worst offenders, such as heavy polluters and big oil companies, but set few other limits on what they will invest in.
Investing in these is a way to minimise the damage your money does, but not a big positive step.
Other funds take a “dark green” approach. This means actively hunting out investments with a positive environmental impact, in a similar way to the investment trusts.
These have a more focused strategy and a bigger positive impact.
The real problem though is watching out for funds that are applying a greenwash to an otherwise ordinary portfolio.
As blockchain mania showed, some people will simply rename a fund and talk the talk to connect to a hot new issue, without making real changes.
Research Matters
As with any investment, research is key. Find out what strategy the funds are using, whether it’s light or dark green, and what steps they take to ensure that their investments are environmentally beneficial.
Focusing on the UN’s Sustainable Development Goals is a good sign.
These set clear aims and are the standard around which much environmental work is now focused.
Institutions such as the Baillie Gifford Positive Change fund use these in deciding where to invest.
The surest way to ensure green investment is to look at institutions with a long-term focus on environmental and social issues.
You can be sure that they’ll treat them seriously and know what they’re doing.
Triodos, a Netherlands-based bank operating in the UK, is a good example with a range of investment options.
After several decades of environmentally friendly banking, it’s a well-established player in the sector.
Green Bonds
Issued by national governments and institutions such as the World Bank, green bonds do the same job that bonds do in general, offering a more stable sort of investment.
The London Stock Exchange has had a dedicated green bonds section since 2015 and they look set to raise $200 billion for green projects this year.
These bonds are mostly only available to institutional investors, but you can invest in them indirectly.
Exchange traded funds including iShares Green Bond Index and the Lyxor Green Bond ITF give you access to indirect investment in green bonds.
With trusts, funds, and bonds all offering accessing to environmental investment, how is a good time to invest in a green future, before it’s too late.
Paul Connolly
Paul Connolly has been a journalist for more than 20 years, as a reporter and editor for Argus Media, Reuters, The Times, Associated Newspapers and The Guardian. He has covered Islamic Finance for Reuters in the 1990s. Paul has since helped launch three newspapers, as well as reported from Tokyo, Los Angeles and Stockholm.
