Global warming has made us all more aware of environmental issues. Many people are determined to do what they can to combat sustainability issues in their homes. But did you know you can fight the good fight as an investor too? There are plenty of excellent green investment funds available to choose from, and we will explain what they are and which ones are trending.
Over the past few years, the number of investors looking not just to increase their wealth but to do so in a way that aligns with their morals on environmental issues has increased significantly.
For example, once upon a time, investors were happy to buy funds in an oil company, many now prefer to invest in green investment funds via companies in the alternative power industry or manufacturers of electric cars, etc.
There are several other options open to you, but first, let’s take a look at green investment funds as a generic product and explain a little more about them.
Green investment funds explained
Green investment funds cover things like mutual funds and other ethical investment products that underpin socially and environmentally responsible business ideals and practices.
A prime example would be investing in companies involved with renewable energy products rather than sinking money into products and companies that could harm our society – companies like weapons manufacturers.
The current Coronavirus pandemic has played a part in promoting green investments even further. According to a recent survey, over 50% of investors questioned said that the recent pandemic makes them more likely to consider sustainability when making new investments.
What are ESG investment funds?
The first thing you’ll come across when you start investigating what is available in terms of green investment funds is the initials ESG. They stand for Environmental, Social, and Corporate Governance. In essence, ESG investment products are designed to consider the impact an asset has on the world environmental stage. They are also in alignment with investors’ financial prospects.
The environmental element of ESG naturally brings environmental factors into consideration. Typically, this category of ESG deals with conservation issues in the natural world and considers other things like carbon emissions, energy efficiency, and pollution.
The social element of ESG focuses on the relationship between business, its employees, and the community it serves. Socially responsible investing covers things like customer satisfaction, gender equality, and working conditions.
The last of the three elements, governance, looks at the standards a company works towards as it operates. These standards include the fair selection of members of the board of directors, the pay that top executives are awarded, and issues such as political lobbying.
The best green investment funds UK investors can choose
As many as 400 new ESG investment products were launched worldwide in the first six months of last year (2021). Twenty-one of these ESG products were launched here in the UK. It represented a global take of over £6.7 billion, £2.4 billion up from the previous year.
It’s good and bad news. Good from the point of view that there are more green investment funds to choose from, giving investors a range of portfolios that match their investing style. Bad from the viewpoint that the wider range of choice, the more difficult it can be to decide which are the best green investment funds to select.
How ESG investment funds are driving the green transition
In the past, investors were primarily driven by growth and return when considering which funds they should invest their money in.
But in recent times, a new trend has emerged, instead of focussing solely on growth, climate and the environment are now prime considerations. Growth and return are still highly desirable, but now investors realise that these expectations are not mutually exclusive. They can be sought after in tandem and complement each other.
Investing in green energy funds is driving the transition, and the funds that people are selecting include green energy, green technology, green mutual funds, and green transport. Let’s take a quick look at the basics of each.
Green energy investment funds
The US Energy Information Administration has stated that in their informed opinion, by the year 2050, more than half of the planet’s energy production will come from renewable sources like solar, wave and wind power.
Achieving this will require a massive commitment, something that we are already beginning to see from leading energy providers in the UK. You can do your bit to help with this transitioning by putting some of your money into green energy investment funds.
Leading products include the Invesco WilderHill Clean Energy ETF and the Gresham House Energy Storage Fund – top green investment funds that could give you great returns.
Green technology investment funds
There are numerous green technology investment funds UK citizens can put their money into that covers various aspects of a greener future. Green technology is a blanket phrase that covers all sectors, including energy and transportation. But it also includes some specialist niches such as cool pavements, milk textiles, plant-based packaging, plant walls, plastic roads, and sustainable mobile phones.
Green investing mutual funds
Mutual funds are very attractive because they allow multiple shareholders to invest in bonds, stocks and shares, and other types of assets in high profile portfolios that, as an individual investor, you probably would not otherwise have been able to afford.
You’ll find various categories of mutual funds relating to the proportion of risk you’re willing to take. But the fact that you will be investing in various assets gives you that all-important diversification, which helps reduce the risk element. The money in green investing mutual funds is managed by a fund manager.
Green transportation funds
Driven by advancing technologies and innovative mobility solutions, the global investment market for green transportation is expected to reach £110 billion within the next 5 years. People are pumping huge amounts of money into new mobility start-ups.
In November, here in the UK, the government outlined an ambitious 10-point plan outlining £12 billion worth of investment, part of which relates to supporting the UK’s world-leading electric vehicle manufacturing plants. The time for investing in green transportation funds has never been better.
A selection of the best green investment funds available today
There is plenty of this choice when it comes to green investment funds. Some of the top-performing funds today include:
- The BMO Responsible Global Equity Fund – This fund concentrates on companies with strong ESG credentials. Over the past 10 years, it has shown an impressive return of 240%. It is considered to be the third most successful ethical fund worldwide.
- The Guinness Sustainable Energy Fund – As a fund focusing on renewable energy sources, this product allows you to contribute towards sustainable energy production while also offering excellent returns.
- The Royal London Sustainable Leaders Fund – This fund provides you with a diverse portfolio of assets with returns of 195% over the last 10 years. It is one of the top-performing ethical funds here in the UK. It focuses on companies contributing towards improving the environment, human welfare and the quality of life.
The time is right for investing in green investment funds
With government subsidies likely to increase in the near future as the UK works its way towards zero emissions by 2050 by providing the base for ESG companies to thrive and prosper, now is a good time to jump on the green investment bandwagon.
For the best advice regarding investing green, why not talk to a wealth specialist company like Moneyfarm about green ESG/EST investments today?