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Are Green Investments a Good Idea?

May 21, 2021

The COVID-19 virus has rocked the world, further exposing the already fragile relationship between humanity and the natural environment. Research suggests global carbon emissions may have dropped by 17% due to lockdowns and stay-at-home orders, but based on the forecasted economic bounce-back, this could be a fleeting change.

In a bid to establish long-term environmental development, 115 companies worldwide have urged governments to align their COVID-19 economic responses with the latest climate science. 

Despite future uncertainty, could this be a sign of opportunity for green investments to help governments and businesses re-build more sustainable ways of working?

What Are Green Investments?

Green investments are activities that commit businesses to the conservation of our natural resources, the use of alternative energy, the implementation of clean air and water, or other environmentally conscious business practices.

The Pros and Cons of Green Investments

With green investments, is it possible to turn a profit by championing organisations that strive towards sustainability? As an investor, are they worth the time? 

The Negatives

 

  • When Ethics Trump Performance

Limiting investment options by choosing green investment funds can mean business ROI is potentially lower. If green investing becomes the primary objective, the financial side of the equation can suffer.

 

  • When Companies Aren’t as Green as They Seem

The Volkswagen ‘clean diesel’ scandal of 2015 is a perfect example of marketing over morals. For businesses wanting to capitalise on the increased social interest in climate change, appearing green can simply be a means of attracting and retaining consumers. 

 

  • Green Investing is Subjective

Green investing is not always black and white. Take nuclear energy. If considering the damage caused to the environment through nuclear accidents, nuclear investing can be seen as one of the least socially responsible ventures. However, some would argue that the industry is indeed a worthwhile green investment when viewed as a substitute for fossil fuels.

 

The Positives

 

  • Green Investment Aligns with Company Values

If values matter, then socially responsible investing is an opportunity for businesses to put their money where their mouth is. If company investment portfolios are destroying the planet, not only will it be hard to convince anyone that you’re a committed environmentalist, but it may cause some sleepless nights for your clients.

 

  • A Chance to Reward Green Organisations

Investing in companies dedicated to improving business practices and embracing environmentalism is something that deserves recognition. By choosing to invest in green ventures, investors are taking a stand and aligning their ethics with their portfolios to help build a more sustainable future.

 

  • Your Investment Can Change the World for the Better

You can’t guarantee green investing will stop climate change in its tracks. However, investors funnelling money into organisations determined to build better, greener and more sustainable businesses grant projects the resources they need to succeed while contributing towards vital societal goals.

Which Green Companies To Invest In?

Discover what to look out for when helping your clients make green energy investments.

Invest in Organisation with a High ESG Performance Rating

Eco-friendly businesses have high ESG performance ratings.

Environmental, Social, and Governance (ESG) are three central pillars for measuring and assessing the sustainability and societal impact of investment in a business.

Generally, the more information a business discloses about environmental and sustainability practices, the higher their ESG rating score will be. For those looking to pursue green investments, the criteria outlined by ESG performance ratings are an excellent tool for assessing eco-friendly performance. 

You can read more about ESG investment in our other article here.

Embrace innovative green technology

Between 1990 and 2018, the EU reduced greenhouse gas emissions by 23% while growing the economy by 61% due to green energy investments and technology investments. 

Meeting green business objectives requires high levels of investment in green and low carbon energy technologies, like wind turbines or air-source heat pumps. But, technology also has the power to help take a company beyond just the surface-level changes and is an excellent indicator of green business practices in action.

When considering green investment funds, some of the innovative technologies to keep your eye on include:

  • Cloud-based Computing

    Cloud-powered solutions host numerous virtual servers on a single, powerful server. On top of being more technologically efficient, cloud platforms also allow businesses to reduce the space needed in an office or factory that would have once housed servers to store data. Like Amazon and Google, some companies keep their cloud servers in cold countries and underground to reduce energy bills and actively contribute towards being a greener and more sustainable company by buying their electricity directly from green energy suppliers.

  • Advanced-Data Analytics

    Companies are increasingly collecting and using data to create valuable and intelligent insights to monitor their organisation’s energy infrastructure. Data-driven insights about energy performance allow modern businesses to optimise their energy usage and improve energy efficiency with low-carbon technology recommendations. These green technologies include LED lighting, advanced heating and cooling solutions and energy control systems.

Green Investments: An Investment in Our Future

COVID-19 has thrown the fragility of our relationship with the natural world into greater relief, spurring governments, businesses and societies to invest its resources, time and energy into solving our most significant challenge yet: climate change. 

With so much uncertainty caused by the pandemic, it’s never been more critical for investors to look towards the future and make green investments. 

When choosing organisations and projects to support, focus on innovative, green technologies and businesses with high ESG ratings for strong investments that make business finances go further. Thorough research into prospective companies will ensure their values align with environmental sustainability to avoid funding the wrong projects. 

Partnering with a qualified accountant can help you understand the risks of each investment before you commit, simplifying the process and providing you with more financial security.

Collaborate with INAA

INAA is an International Association of Independent Accounting firms, established over 25 years ago to facilitate cross-border business. 

We aim to connect accounting firms who aim to deliver quality professional services around a shared vision to make global business personal and take personal business global. Our collaborative association of international businesses is committed to being a part of the worldwide accountancy and conversations around global sustainability.

Join today to start building powerful business relationships.