You are probably familiar with the impact climate change is having on our planet – with rising temperatures and extreme weather occurring on a global scale, there has been much discussion surrounding the steps we can take to make a positive difference.
This has included an array of techniques, from recycling and reducing your meat consumption to limiting your overall travel by plane in addition to buying second-hand.
What may be a less well-known method of helping the planet is the realm of eco-investing: this is defined as when a buyer invests in a company that actively practices a green ethos through supporting or providing environmentally friendly products.
This support can manifest through companies placing a specific focus on protecting habitats, reducing pollution, minimising the use of natural resources and ultimately seeking to champion renewable energy over fossil fuels.
There are several types of eco-investment that investors may wish to capitalise on when focusing on environmentally friendly companies.
Eco Real Estate
Eco Real Estate consists of directly investing in a property that has been built with sustainability in mind – this will usually involve housing with sustainable features such as solar panels and energy-efficient lighting, for example.
There has been a considerable interest in Eco Real Estate recently, with many developers and property investment companies capitalising on the popularity. RWInvest, for example, launched the first eco-property based within North West England.
Property investors have been drawn to such companies through their focus on supporting clean energy and lowering carbon emissions through the implementation of green technologies such as rainwater recycling systems and air source heat pumps.
Eco Bonds
An Eco Bond – also known as a Climate Bond – consists of a fixed-income investment through a loan to an organisation or company that specifically implements an eco-friendly ethos.
The issuer usually sets out to ensure the investor that all the raised funds will go to climate-change assets such as climate mitigation funding programmes and renewable energy plants.
As Eco Bonds come with tax advantages, they have become more attractive to investors as opposed to traditional bonds – this has been reflected in the data with the Climate Bonds Initiative showing an astonishing $517.4 billion spent on Eco Bonds in 2021.
Eco Stocks
Eco Stocks, or green stocks, are simply the practice of buying stocks in an eco-conscious company – with a considerable shift in companies adopting green principles, this has become a popular form of eco-investment.
Studies have shown that 54% of Gen Z consumers and 50% of millennials are willing to spend up to 10% more on sustainable products, which could mean that Eco Stocks could instil a greater return than normal investments.
Ethical Funds
Ethical Funds are a way for investors to place their money in a mutual fund that offers shares in an array of eco-conscious companies.
By offering the chance to invest in a combination of environmentally friendly companies, investors have the chance to further diversify their portfolio as opposed to if they only invested in one.
Indexes such as the Nasdaq Clean Edge Green Energy Index (CELS) actively track the performance of companies that are developers, manufacturers, distributors and installers of clean-energy technologies.
Ethical Banking
Investors who want to grow their wealth in a way that aligns with their own morals and worldview may have struggled in the field of banking, where it is treated as a truism that banks are not the most ethical form of investment.
Yet recent developments surrounding green policies have given rise to ethical banks which actively strive to invest money in socially and morally positive ways that help the local community or environment. For example, ethical banks that encourage environmental sustainability may not wish to offer paper billing and invest their money locally.
Each ethical bank holds different principles, so it is important to ensure the right fit for you when picking a bank that places a specific focus on the environment.
