The world is moving toward environmental responsibility, as does the capital market – which responds to the problem of the environment. In addition to the capital market’s response to the environmental trends, the climate crisis poses a “systematic risk” to the economy: Lack of preparation for it, or tardy preparation, will incur economic damages, endangering the economic stability of financial institutions and economies worldwide.
Green investments demonstrate the capital market’s preparation for environmental issues, and are environmentally-oriented investments, incorporating a set of “green” values into the portfolio.
In the past, an investor in the capital market who was, for example, concerned by global warming, by the mass production of polluting plastic, by deforestation devoid of sustainable planning or by air pollution – could have only directly invested in companies engaged in those fields; meaning, such an investor could purchase shares of companies engaged in solar energy, recycling or biodegradable products.
Nowadays, such an environmentally-minded investor does not necessarily have to invest in green energy companies, but also in countless companies that are compliant with strict environmental standards adopted by authorities and exchanges around the world.
As environmental awareness grew, alongside increased understanding of the economic risk, a kind of environmentally-oriented investment “industry” emerged, with authorities and exchanges around the world adopting standards and guidelines under the initials ESG – Environment, Society and Governance. A trend arose where companies traded on the capital market redesigned their activity so that they could become “greener”, more socially responsible and more sustainable – to remain relevant. The leap in every index and in the amounts raised by the ESG foundations tells the whole story: Investors want both to improve the environment and to enjoy a high return.
Redirecting investments to companies that are compliant with the Green Standard is a global mission, encompassing many financial entities who operate to reduce or redirect investments away from companies based on fossil fuels. For example: The European Investment Bank, the Rockefeller Foundation – NEST, the UK’s largest pension fund – TCI, the world’s most profitable hedge fund, and Storebrand – Norway’s largest private asset fund. Also operating in the background are secondary players who are not directly involved in the capital market: regulatory entities – the capital market authorities, government and internal auditors – who use laws and regulations to push toward compliance with ESG objectives at companies, civil society organizations such as Global Reporting Initiative and the OECD – which create standards and tools for reporting companies’ environmental impact; and the exchanges themselves. For example: The world’s most famous share index – S&P 500, which monitors the US market – has been given a “green version: the S&P500 ESG index, which has yielded a return of 30% in 2021 alone.
Our experts on green investments will compare for you various parameters of various investment funds’ portfolios, focusing on the ESG component. This will allow you to make an informed decision regarding the investment, secure in the knowledge that your money is both producing the maximum return and having a positive environmental impact.
A green portfolio is actually relevant to all types of investors, and you would do well to be familiar with its advantages. A green portfolio is suitable for those investors who have a green agenda, for those who only have eyes for the return, and for those who understand that green investments yield returns similar to those of funds investing in more polluting companies – and that therefore there is no reason not to invest in green funds!