Eco-investing

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Eco-investing or green investing is a form of socially responsible investing where investments are made in companies that support or provide environmentally friendly products and practices. These companies encourage (and often profit from) new technologies that support the transition from carbon dependence to more sustainable alternatives. [1] Green finance is "any structured financial activity that’s been created to ensure a better environmental outcome." [2]

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As industries' environmental impacts become more apparent, green topics have not only taken center stage in pop-culture, but the financial world as well. In the 1990s, many investors "began to look for those companies that were better than their competitors in terms of managing their environmental impact." While some investors still focus their funds to avoid only "the most egregious polluters," the emphasis for many investors has switched to changing "the way money is used", and using "it in a positive, transformative way to get us from where we are now ultimately to a truly sustainable society." [3] Investment in companies that are damaging to the environment, and investment into the infrastructure that supports those companies detracts from environmentally sustainable investment. [4]

The Global Climate Prosperity Scoreboard – launched by Ethical Markets Media and The Climate Prosperity Alliance to monitor private investments in green companies – estimated that over $1.248 trillion has been invested in solar, wind, geothermal, ocean/hydro and other green sectors since 2007. This number represents investments from North America, China, India, and Brazil, as well at other developing countries. [5]

Eco/green investing versus socially-responsible investing

Firms investing in climate in Europe as found in the European Investment Bank's Investment Survey 2020 Firms investing in climate.png
Firms investing in climate in Europe as found in the European Investment Bank's Investment Survey 2020

While many eco-investments may be considered socially responsible investments, and vice versa, the two are not mutually inclusive. Socially responsible investing is the practice of investing only in those companies which satisfy certain moral or ethical criteria. This may include companies with an interest in the environment, but also supports various other social and religious issues. [8]

Eco-investing narrows in on the interests of sustainable environmental issues. Specifically, eco-investments focus on companies who work on renewable energy and clean technologies.

Eco-investing sectors

There are several sectors that fall under the eco-investing umbrella. Renewable energy refers to both solar, wind, tidal current, wave and conventional hydro technology. This includes companies that build solar panels or wind turbines, or the raw materials and services that contribute to these technologies [1] It also refers to energy storage companies that develop and use technologies to store large amounts of energy, particularly renewable energies. A good example of this is the fuel cells used in hybrid cars. [9] Also under the renewable energy sector are biofuels. This group includes companies that use or supply biological resources (like algae, corn or waster wood) to create energy or fuel. Other companies that are included in the renewable energy group are geothermal power companies who use or convert heat to electric energy and hydroelectric companies who harness water energy to make electricity. [1]

Investment into green sectors often involves the development of new technologies that are more environmentally friendly. This comes with high up-front costs that are more difficult to justify to investors. [4]

The Buildings and Efficiency sector refers to companies that manufacture green building materials or energy-efficient services in the world of engineering and architecture. Green building materials include energy-efficient glass, insulation, and lighting among others. Recycling companies and energy conservation companies also fall under this sector. [1]

The Eco Living sector refers to companies that offer sustainable goods and services for healthy living. This includes "green" pesticides, health care, and pharmaceuticals. [1]

Green investment has significantly grown in the UK and there were 136 funds listed on the Worldwise Investor fund library. [10] under the themes: agriculture, carbon, clean energy, forestry, environmental, Multi-thematic and water. In 2018 of these funds accounted for around £21.8bn in the UK. [11]

Environmental ratings

Companies have emerged to evaluate and rate companies' overall performance in their impacts to the environment. Sustainalytics and RepRisk are two examples of firms now collecting, compiling and publishing lists and scorecards of environmental and other risks.

See also

Related Research Articles

<span class="mw-page-title-main">Renewable energy</span> Energy collected from renewable resources

Renewable energy is energy from renewable natural resources that are replenished on a human timescale. The most widely used renewable energy types are solar energy, wind power, and hydropower. Bioenergy and geothermal power are also significant in some countries. Some also consider nuclear power a renewable power source, although this is controversial. Renewable energy installations can be large or small and are suited for both urban and rural areas. Renewable energy is often deployed together with further electrification. This has several benefits: electricity can move heat and vehicles efficiently and is clean at the point of consumption. Variable renewable energy sources are those that have a fluctuating nature, such as wind power and solar power. In contrast, controllable renewable energy sources include dammed hydroelectricity, bioenergy, or geothermal power.

Eco-capitalism, also known as environmental capitalism or (sometimes) green capitalism, is the view that capital exists in nature as "natural capital" on which all wealth depends. Therefore, governments should use market-based policy-instruments to resolve environmental problems.

A green economy is an economy that aims at reducing environmental risks and ecological scarcities, and that aims for sustainable development without degrading the environment. It is closely related with ecological economics, but has a more politically applied focus. The 2011 UNEP Green Economy Report argues "that to be green, an economy must not only be efficient, but also fair. Fairness implies recognizing global and country level equity dimensions, particularly in assuring a Just Transition to an economy that is low-carbon, resource efficient, and socially inclusive."

Eco commerce is a business, investment, and technology-development model that employs market-based solutions to balancing the world's energy needs and environmental integrity. Through the use of green trading and green finance, eco-commerce promotes the further development of "clean technologies" such as wind power, solar power, biomass, and hydropower.

<span class="mw-page-title-main">Clean technology</span> Any process, product, or service that reduces negative environmental impacts

Clean technology, also called cleantech or climatetech, is any process, product, or service that reduces negative environmental impacts through significant energy efficiency improvements, the sustainable use of resources, or environmental protection activities. Clean technology includes a broad range of technology related to recycling, renewable energy, information technology, green transportation, electric motors, green chemistry, lighting, grey water, and more. Environmental finance is a method by which new clean technology projects can obtain financing through the generation of carbon credits. A project that is developed with concern for climate change mitigation is also known as a carbon project.

<span class="mw-page-title-main">Development Bank of Southern Africa</span> Government finance company

The Development Bank of Southern Africa (DBSA) is a development finance institution wholly owned by the Government of South Africa. The bank intends to "accelerate sustainable socio-economic development in the Southern African Development Community (SADC) by driving financial and non-financial investments in the social and economic infrastructure sectors".

<span class="mw-page-title-main">Socially responsible investing</span> Any investment strategy combining both financial performance and social/ethical impact.

Socially responsible investing (SRI) is any investment strategy which seeks to consider financial return alongside ethical, social or environmental goals. The areas of concern recognized by SRI practitioners are often linked to environmental, social and governance (ESG) topics. Impact investing can be considered a subset of SRI that is generally more proactive and focused on the conscious creation of social or environmental impact through investment. Eco-investing is SRI with a focus on environmentalism.

<span class="mw-page-title-main">Renewable energy commercialization</span> Deployment of technologies harnessing easily replenished natural resources

Renewable energy commercialization involves the deployment of three generations of renewable energy technologies dating back more than 100 years. First-generation technologies, which are already mature and economically competitive, include biomass, hydroelectricity, geothermal power and heat. Second-generation technologies are market-ready and are being deployed at the present time; they include solar heating, photovoltaics, wind power, solar thermal power stations, and modern forms of bioenergy. Third-generation technologies require continued R&D efforts in order to make large contributions on a global scale and include advanced biomass gasification, hot-dry-rock geothermal power, and ocean energy. In 2019, nearly 75% of new installed electricity generation capacity used renewable energy and the International Energy Agency (IEA) has predicted that by 2025, renewable capacity will meet 35% of global power generation.

For solar power, South Asia has the ideal combination of both high solar insolation and a high density of potential customers.

<span class="mw-page-title-main">Renewable energy in Africa</span>

The developing nations of Africa are popular locations for the application of renewable energy technology. Currently, many nations already have small-scale solar, wind, and geothermal devices in operation providing energy to urban and rural populations. These types of energy production are especially useful in remote locations because of the excessive cost of transporting electricity from large-scale power plants. The applications of renewable energy technology has the potential to alleviate many of the problems that face Africans every day, especially if done in a sustainable manner that prioritizes human rights.

<i>The Clean Tech Revolution</i> Book by Ron Pernick

The Clean Tech Revolution: The Next Big Growth and Investment Opportunity is a 2007 book by Ron Pernick and Clint Wilder, who say that commercializing clean technologies is a profitable enterprise that is moving steadily into mainstream business. As the world economy faces challenges from energy price spikes, resource shortages, global environmental problems, and security threats, clean technologies are seen to be the next engine of economic growth.

Green jobs are, according to the United Nations Environment Program, "work in agricultural, manufacturing, research and development (R&D), administrative, and service activities that contribute(s) substantially to preserving or restoring environmental quality. Specifically, but not exclusively, this includes jobs that help to protect ecosystems and biodiversity; reduce energy, materials, and water consumption through high efficiency strategies; de-carbonize the economy; and minimize or altogether avoid generation of all forms of waste and pollution." The environmental sector has the dual benefit of mitigating environmental challenges as well as helping economic growth.

<span class="mw-page-title-main">Renewable energy in developing countries</span> Overview of the use of renewable energy in several developing countries

Renewable energy in developing countries is an increasingly used alternative to fossil fuel energy, as these countries scale up their energy supplies and address energy poverty. Renewable energy technology was once seen as unaffordable for developing countries. However, since 2015, investment in non-hydro renewable energy has been higher in developing countries than in developed countries, and comprised 54% of global renewable energy investment in 2019. The International Energy Agency forecasts that renewable energy will provide the majority of energy supply growth through 2030 in Africa and Central and South America, and 42% of supply growth in China.

The Climate Investment Funds (CIF) were established in 2008 as a multilateral climate fund in order to finance pilot projects in developing countries at the request of the G8 and G20. The CIF administers a collection of programs with a view of helping nations fight the impacts of climate change and accelerate their shift to a low-carbon economy.

This page is an index of sustainability articles.

A Green bond is a fixed-income financial instruments (bond) which is used to fund projects that have positive environmental and/or climate benefits. They follow the Green Bond Principles stated by the International Capital Market Association (ICMA), and the proceeds from the issuance of which are to be used for the pre-specified types of projects.

<span class="mw-page-title-main">Renewable energy in Kenya</span>

Most of Kenya's electricity is generated by renewable energy sources. Access to reliable, affordable, and sustainable energy is one of the 17 main goals of the United Nations’ Sustainable Development Goals. Development of the energy sector is also critical to help Kenya achieve the goals in Kenya Vision 2030 to become a newly industrializing, middle-income country. With an installed power capacity of 2,819 MW, Kenya currently generates 826 MW hydroelectric power, 828 geothermal power, 749 MW thermal power, 331 MW wind power, and the rest from solar and biomass sources. Kenya is the largest geothermal energy producer in Africa and also has the largest wind farm on the continent. In March 2011, Kenya opened Africa's first carbon exchange to promote investments in renewable energy projects. Kenya has also been selected as a pilot country under the Scaling-Up Renewable Energy Programmes in Low Income Countries Programme to increase deployment of renewable energy solutions in low-income countries. Despite significant strides in renewable energy development, about a quarter of the Kenyan population still lacks access to electricity, necessitating policy changes to diversify the energy generation mix and promote public-private partnerships for financing renewable energy projects.

<span class="mw-page-title-main">Green industrial policy</span> Strategic government policy

Green industrial policy (GIP) is strategic government policy that attempts to accelerate the development and growth of green industries to transition towards a low-carbon economy. Green industrial policy is necessary because green industries such as renewable energy and low-carbon public transportation infrastructure face high costs and many risks in terms of the market economy. Therefore, they need support from the public sector in the form of industrial policy until they become commercially viable. Natural scientists warn that immediate action must occur to lower greenhouse gas emissions and mitigate the effects of climate change. Social scientists argue that the mitigation of climate change requires state intervention and governance reform. Thus, governments use GIP to address the economic, political, and environmental issues of climate change. GIP is conducive to sustainable economic, institutional, and technological transformation. It goes beyond the free market economic structure to address market failures and commitment problems that hinder sustainable investment. Effective GIP builds political support for carbon regulation, which is necessary to transition towards a low-carbon economy. Several governments use different types of GIP that lead to various outcomes. The Green Industry plays a pivotal role in creating a sustainable and environmentally responsible future; By prioritizing resource efficiency, renewable energy, and eco-friendly practices, this industry significantly benefits society and the planet at large.

Green recovery packages are proposed environmental, regulatory, and fiscal reforms to rebuild prosperity in the wake of an economic crisis, such as the COVID-19 recession or the 2007–2008 financial crisis. They pertain to fiscal measures that intend to recover economic growth while also positively benefitting the environment, including measures for renewable energy, efficient energy use, nature-based solutions, sustainable transport, green innovation and green jobs, amongst others.

Sustainable finance is the set of practices, standards, norms, regulations and products that pursue financial returns alongside environmental and/or social objectives. It is sometimes used interchangeably with Environmental, Social & Governance (ESG) investing. However, many distinguish between ESG integration for better risk-adjusted returns and a broader field of sustainable finance that also includes impact investing, social finance and ethical investing.

References

  1. 1 2 3 4 5 Henshaw, Mark (2010). "Eco Investor Guide" (PDF). Eco Investor Guide, Inc. Archived from the original (PDF) on 25 May 2010. Retrieved 11 June 2010.
  2. ↑ Fleming, Sean (9 November 2020). "What is green finance and why is it important?". World Economic Forum. Archived from the original on 2021-04-16. Retrieved 2020-12-28.
  3. ↑ Keane, Robert F. (1 November 2009). "The Green Advisor: SRI & Green Investing Grow Up". Investment Advisor. AdvisorOne. Archived from the original on 22 July 2012. Retrieved 11 June 2010.
  4. 1 2 "Climate Change 2022: Mitigation of Climate Change". IPCC. Archived from the original on 2022-08-02. Retrieved 2022-04-04.
  5. ↑ "New Global Climate Prosperity Scoreboard Finds Over $1 Trillion Invested in Green Since 2007". Green Money Journal. Spring 2010. Archived from the original on 28 May 2010. Retrieved 11 June 2010.
  6. ↑ Kalantzis, Fotios (9 August 2021). "Firms brace for climate change". European Investment Bank. Archived from the original on 2021-09-28. Retrieved 2021-10-12.
  7. ↑ EIB Investment Report 2020/2021: Building a smart and green Europe in the COVID-19 era. European Investment Bank. 2021-01-21. ISBN   978-92-861-4811-8. Archived from the original on 2023-07-11. Retrieved 2023-10-12.
  8. ↑ "Socially Responsible Investing". Investor Glossary. Archived from the original on 13 July 2011. Retrieved 11 June 2010.
  9. ↑ "Green Technology & Alternative Fuels". Demand Media, Inc. Archived from the original on 26 May 2010. Retrieved 11 June 2010.
  10. ↑ Worldwise Investor - Fund Library
  11. ↑ "Bonds: Green money". 15 May 2018. Archived from the original on 25 November 2020. Retrieved 12 October 2023.
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