Investing for the future of the planet

What does green investing mean to you?

Everything seems to be turning green so much so that even the traditionally blue Tory party is adopting a decidedly green tinge nowadays.  The topic of protecting our environment seems to be on every agenda from global leader conferences to local news stories, from headline grabbing climate-related disasters to our own back gardens.  It’s little wonder then that this interest in all things eco-friendly has now also become a hot topic in the world of finance and investment. 

So the question has to be whether this is something you should be considering for your own investment portfolio, and if so, what exactly should you be looking at?

Join the Zeitgeist?

The Government is now committed to reducing UK carbon emissions by 78% (from 1990 levels) by 2035.  That’s a hefty challenge to undertake, but falls in line with a movement that can be seen around the world in many different countries, including the US and China – two of the worst contributors to greenhouse gas emissions.

The impact of striving towards own national goals, alongside efforts of other governments, should therefore logically create growth in the number of new and existing businesses adopting, developing and pioneering new ways to do things which have a significantly reduced carbon footprint and a more sustainable outlook.  As Boris Johnson pointed out in his speech referencing these ambitious plans early in 2021, the focus of creating an environmentally responsible society should not be mutually exclusive to economic growth and job creation.  Whether this is harder to achieve in reality or not, the vision is to make ‘going green’ commercially successful and viable. 

Where there is commercial success and viability, surely investment opportunity also exists?

Should you go all in?

“At its best, investment should be about opportunity spotting as well as fair bets,” explains Karteek Patel, CEO of Crowdstacker.  “We talk about weighing up risks all the time, and the need to create an investment portfolio which can withstand only as much risk as you are personally able and prepared to take. 

“Opportunities necessarily come hand-in-hand with increased risk simply because you’re trying to determine the likelihood of different outcomes.  By their very nature, trying to spot opportunities early enough to maximise your financial benefit is very difficult and carries the risk of failure, either because the business you invest in just doesn’t compete well enough, or the new technology or market it is trying to open up, fails.  However, if you get it right it can be very rewarding.

“If you’re looking for new opportunities, particularly in something such as businesses which are part of the green revolution, it pays to do your homework, to assess all ‘opportunities’ in the light of your personal circumstances, and to make sure you stick to the golden rules of creating balanced risk across your portfolio.”

What are the key sectors in green investment?

Bearing this in mind let’s take a look at some of the sectors which could be the most interesting to investigate further if you’re looking to add some green credentials to your investments.

1. Road Side Chargers

The demise of petrol stations still seems like a crazy idea that will never happen, but with all cars sold in the UK having to be at least partially powered by electricity by 2030 that reality could be just a few years away.

By the last quarter of 2020 one in twenty cars sold in the UK was powered entirely by electricity, and nearly the same number were hybrids.  Whilst petrol and diesel powered vehicles still dominate, the market share of Electric Vehicles (EVs) is growing. Consequently there are more and more drivers looking for charging points rather than petrol pumps.  In fact, it may surprise you to know that there are already more charging points, upwards of 15,000 to be exact, than there are petrol stations in the UK.  The global market for EV charging points is set to grow somewhere in the region of 40-50% by 2026 according to some reports.

So if you’re looking at potential investments in infrastructure you might want to take a closer look at some of the businesses operating in the road side charging sector.

2. Battery development

Generating energy using sustainable and renewable sources is only half the battle.  The other half is about storage.  If we’re going to be relying more on unpredictable and uncontrollable power sources such as wind and solar, we will also need ways of storing this power so it can be deployed when needed not just when it is available. 

Whether it’s creating huge battery storage farms to support the national grid, pushing current boundaries to create lightweight batteries for cars and even aeroplanes, or reducing the size and cost of batteries to make them accessible and suitable for domestic use, there’s a whole raft of technological development taking place right now.  As an investor it might be worth taking some time to look beyond the obvious investments in energy production, and instead think about the knock-on requirements in energy storage and practical applications.

3. Building materials and boilers

Building sustainably has been a watchword in the construction industry for several decades now, and most of us are very used to things like Energy Efficiency Reports and even air leakage (more commonly known as draughts!) tests.  However, there’s a whole raft of other innovations and changes coming to the construction industry.

For example, according to The Energy Saving Trust, the ethos behind Germany’s Passivhaus concept is gaining traction in the UK.  Passivhaus literally translates to ‘Passive House’ and refers to a building which is basically means they maintain an even temperature simply by the way they are built rather than by using cooling or heating methods.  They utilise heat from the sun, equipment in the house and occupants to create warmth, and they are ventilated so that this warmth is maintained at a comfortable level.  There are already several Passivhaus developments around the UK.

And there are other innovations taking place too in the field of insulation, boilers, glass, recycled steel, bamboo, and recycled plastics.  It’s worth keeping an eye on manufacturers and developers of these materials.

4. Eco-tourism

Holidays have understandably been a bit thin on the ground since the outbreak of COVID19, but hopefully they will be back on the agenda soon.  Pre-pandemic one of the growth areas in the travel industry was eco-tourism.  Market research agency, Technavio, was predicting accelerated market value growth between 2019-2023 of up to 10 per cent for this specific part of the sector.  What makes tourism ‘eco’?  Well, it can cover all aspects of going on holiday from the food and drink consumed, to how accommodation is run or even built in the first place, and of course it can also include means of travel.  Essentially it also covers the impact that the holiday has on communities and the environment, particularly whether money spent by tourists is supporting eco-causes. 

The market may be of interest to investors looking to support green businesses and who want to ensure their capital is helping to create a sustainable travel industry which accommodates the needs of people looking for a much needed break as well as the needs of the planet.

Green for Go?

There are plenty of other types of businesses which investors might want to look at to lend a greener edge to their portfolio.  If you want to read into this area further some great sources of more information includes good-with-money.com and www.greenfinanceguide.com  both of which write regularly about socially responsible investing issues and opportunities.