More investors are showing an interest in environmentally-friendly forms of investment, otherwise known as ‘eco-investing’. It is essentially a more environmentally-aware form of investment, in which an investor selects products and companies to invest in that offer green services or initiatives. An eco-investor will therefore decide what to invest in after considering the green credentials of a company, product or service. They will consider the impact the company or asset has on the environment, and how this affects their investment strategies. Eco-investors are also looking to maximise their capital and invest in companies and services that will deliver strong returns.
Are you looking to invest in green companies and services? Do you require advice on environmentally-friendly investing? Financial Advisor UK offers a national network of fully FCA-registered and approved financial advisors and a unique matching service to pair you with the right advisor for your needs. We can ensure you get the best professional advice, along with the best deals available.
Eco-investors usually select the companies and assets they invest in by carefully researching a company and the impact it has on the world’s climate. They will take a particular interest in companies that work to tackle climate change, reduce pollution and adopt green technologies. This form of investment is becoming increasingly popular because of the awareness of climate change and the need to limit damage to the environment. Eco-investors often consider how the stocks and shares they hold affect climate change and their climate footprint.
In previous years, eco-investors have been seen as activists rather than serious investors. But that approach is rapidly changing, with US markets alone seeing around $26 trillion invested in sustainable companies and initiatives. According to CNBC, since 2016, socially responsible investment (SRI) assets have been growing year-on-year. On the market, eco-investors have more options now than ever before.
Sustainable investments
Some investors are wary of sustainable or eco-investments because they are worried about the impact on their returns. This view is based on the belief that very few companies on stock markets are actually completely green and sustainable. This view is however outdated, as eco-companies are taking up more of the stock market share in the modern business world, and are attracting larger numbers of investors. In many cases, sustainable stocks outperform other stocks.
When it comes to environmentally-friendly investments, you can either select and invest in sustainable companies and funds yourself, managing your own investment portfolio, or you can use a wealth manager/wealth advisor or an investment platform that will help manage your portfolio for you, recommending products that you may be interested in.
If you are new to sustainable investments, we highly recommend speaking to one of our advisors at Financial Advisor UK, who can offer guidance on the best products and companies to invest in based on your available capital and financial situation. As investment always carries a level of risk, it is important that you speak to an advisor to determine whether sustainable funds are right for you, how long you wish to keep your money invested for, and how much you’d expect to get in return for your investment.
Investments can also go down as well as up, and you should always make sure that any money you invest is money that you will not need within the next five years. As a rule of thumb, you should aim to invest any capital you have for as long as possible without accessing it, in order to maximise your chances of a good return. Our experts at Financial Advisor UK can talk through the best investment practice and strategies with you in order to diversify your portfolio and minimise your level of risk.
The pros of environmentally-friendly investments
When you invest into an environmentally-friendly company or fund, this acts as an incentive for that company to boost their sustainability policies. In order for that company to remain competitive in its market, it has to continue to revolutionise the way it conducts its business operations in order to minimise its impact on the environment. As an investor, a huge positive is that you have the reassurance that the companies you have invested in are working hard to counter their impact on climate change and environmental issues. You don’t have the concern that companies you have invested in are doing damage to the environment. In this sense, by becoming an eco-investor, you are helping to implement a greener change in business and renewed approach to environmental awareness.
The returns you can receive from an environmentally-friendly investment portfolio are also positive. According to the Harvard Business Review, in 2016, low-carbon investments experienced average returns of 27%. Some investors experienced returns of 80%. Such market activity has caused attitudes towards eco-investing to change, with many investors seeing that it is both profitable and better for the environment.
Beware of ‘green-washing’
Newbie investors who are keen to dip their toe in the waters of eco-investment should be aware of ‘green-washing’. This deceitful practice happens when a company claims to place environmental sustainability and green initiatives at the top of its agenda, when it really doesn’t. A good example is a company that boasts of initiatives it takes part in that are actually required by law, or green initiatives that simply do not exist. In order to avoid ‘green-washing’, you should carefully research any company you intend to invest in before doing so. If you are unsure of a company’s credentials or if something doesn’t feel right, it probably isn’t. Trust your instincts as an investor. Our financial advisors at Financial Advisor UK can help you invest in companies and products that operate genuine sustainability practices.