Money makes the world go round and investors have always wanted to make the most they can – but that now can also include helping the planet. Step forward the eco speculator looking to make green investments for altruistic as well as financial reasons.
In 2023, the climate emergency is no longer a faint threat on the horizon. Real-world effects such as extreme weather are becoming more apparent each year and the need for urgent and drastic action has been recognised by governments around the world. In this context, investors are realising how important it is to ensure backing a company doesn’t only benefit their bank accounts, but is done with an ethical mindset.
Of course, this comes with a challenge: how do we know which investments are truly green? On the surface, it might seem self-evident. Fossil fuel companies are not-eco-friendly, and any investments in companies that create weapons or tobacco are outlawed.
Similarly, those organisations who produce single-use plastics or high-emission petrol vehicles are on the naughty list. On the other hand, renewable energy providers, recycling initiatives, and carbon-neutral mass transport systems are much more likely to be rewarding eco-investments.
When you’re looking for zero tolerance, however, it feels much harder to be certain what defines this and what can be hidden behind a lot of fancy financial jargon.
While it is far from perfect, particularly as there is no set impartial institution for awarding scores, the ESG System has been developed to help guide investors in the right direction.
Standing for ‘Environmental, Social, Governance’, an ESG score considers all aspects of a company’s sustainable and responsible practices and presents an easy-to-read ranking. The carbon footprint of a company and how much pollution they generate are included alongside logistical practices, treatment of labour, community responsibility, diversity, ethical distribution of revenues, and many other factors. If you’re looking to make genuine green investments, reviewing ESG scores is a good place to start.
In addition, looking for recognised certificates or awards distributed by governments and trusted independent bodies, fact-checking specific claims by any prospective investee, and completing thorough research will help keep your investments on the right path.
Green Investments That Make a Difference
With all that in mind, what are the five best green investments for making a real difference today?
Whether it comes in the form of wind, solar, hydro, or geothermal generation, renewable energy is perhaps the biggest and most important eco industry in the world today. Investing in these businesses is not only vital for the planet but has a possibility of good returns too. With globally agreed targets for phasing out fossil fuel use, almost every nation on Earth is chasing reliable, long-term, and profitable solutions from the renewable energy industry.
While innovations in productivity and efficiency have been enormous, and continue to be so, the core philosophies behind much of our conventional farming remain the same as they have for centuries. Eco-agriculture can mean anything from cruelty-free practices to reducing reliance on polluting chemicals or adopting practices which stem greenhouse gas generation and water consumption. Finding ways to make farming more sustainable is a key element of righting our ecological wrongs and reducing hunger across the world. As people will always need to eat, it also represents opportunities for sound investment.
Reducing the amount of materials we consign to landfill, dump into the oceans, or burn has been high on the human agenda for decades. As the true extent of the long-term environmental damage caused by discarded waste has become better understood, this has only intensified. Added to this are the threats from deforestation, over-mining, and the increasing awareness that many of today’s essential but disposable technologies require rare and irreplaceable minerals. With all this considered, any business that focuses on waste reduction, either as a primary goal or a core philosophy, is an important option for eco investment.
Green Transport & Technology
From the continuously growing pile of discarded smartphones to the carbon footprint of data centres, 21st-century technology comes with plenty of environmental baggage. On the other side, green technology such as electric and hydrogen-fuelled cars, or smart buildings that use AI for more efficient power usage. is becoming a huge sector for responsible investment. By putting our money into green tech, we can drive innovation that will help the world adopt sustainable practices on potentially unlimited scales.
A shortage of drinkable water is a growing threat across the globe. Wastage and flawed hygiene systems are huge factors in this issue. Many states are also in the insecure position of relying on supplies from areas outside their autonomous control to meet the needs of their citizens.
Furthermore, as climate change intensifies, so will many of the problems regarding water collection and retention. Investment in improved and equitable water management businesses is key to maintaining health and protecting lives around the world.
Options for the Cautious Green Investor
If buying shares in specific companies or industries is outside of your comfort zone when it comes to risk, or your budget doesn’t cover the list prices, there is another option. Initiatives such as Carbon Credit funds allow us to put what we can into a shared pot allocated exclusively for carbon-balancing projects. This reduces the likelihood of losses, and the strain of individual research, while returns are still paid on any gains generated.
If you’re looking to invest responsibly, these are some of the best ways to do it. There is, however, one thing every investor must be vigilant of if zero-tolerance eco trading is their goal – greenwashing.
Loosely explained, greenwashing is the process by which a company loudly professes to have green philosophies and practices while the truth of their operations is more questionable. Essentially, a distraction technique to gain support where it is potentially underserved, or a smokescreen to prevent us from seeing damaging activities that are taking place beneath the radar. Anybody wishing to practise true green investment carries the responsibility of performing due diligence to ensure this is not the case for those they choose to work with.
Despite pitfalls like potential greenwashing and a lack of clear and specific guidance, we have entered an era when keeping our investments green is not only a vital way of contributing to the urgent global issues we face but is easier to do than ever before.
With a little additional research and some clearly defined requirements, every one of us can ensure we are investing in our planet’s future while we look after tomorrow for our families and ourselves.