Many investors are contemplating how and if to integrate “Green” and “ESG” (environmental, social, and governance) investments into their portfolios.
All the indicators are clear: investing in green and ESG growth offers opportunities in both the short and long term.
What is “Green Investing”?
Green investing typically involves the selection of investments in companies with sustainable and environmentally friendly practices and products or services.
While some clean technologies offer improvements that increase resource productivity and efficiency, others decrease environmental impact. As green technology continues to emerge as a growing force, several strong industry clusters have emerged with varying levels of investment as innovation trends emerge and change.
The United Nations Environment Programme (UNEP) breaks green industries into the following categories: wind, solar, biofuels, biomass, small hydro, geothermal, and marine.
What is “ESG” Investing?
ESG Investing (also known as “socially responsible investing,” “impact investing,” and “sustainable investing”) refers to investing which prioritizes optimal environmental, social, and governance (ESG) factors or outcomes.
ESG investing is widely seen as a way of investing “sustainably”—where investments are made with consideration of the environment and human wellbeing, as well as the economy.
It is based upon the growing assumption that the financial performance of organizations is increasingly affected by environmental and social factors.
So What Does the Future Hold For Us?
Pollution and environmental damage used to be seen as the inevitable outcomes of a healthy economy. However, faced with a rapidly heating world, the consensus on this is changing.
Prioritizing “green growth” is replacing 20th-century economic theory. The Organisation for Economic Cooperation and Development (OECD) describes green growth as “a means of fostering economic growth and development while ensuring that natural assets continue to provide the resources and environmental services on which our well-being relies”.
As the push for green growth gathers pace, investors are increasingly backing sustainable businesses. The value of assets managed by passive sustainable funds globally has increased more than 12-fold between 2010 and 2020,
At the end of June 2020, there were 534 sustainable funds globally, with total collective assets under management of $250bn.
Investors are increasingly looking to invest in companies with strong environment social governance (ESG) credentials.
This trend does not simply reflect an increased desire for ethical practices; a growing body of research suggests prioritizing ESG issues can have a material impact on financial performance.
The economic case for green growth and ESG is clear: it provides new and superior growth opportunities, and governments and investors are increasingly prioritizing it as an economic strategy. What is more, the long-term economic risks of not prioritizing sustainable practices are increasingly dire.
The CEO of GlobalNet Israel Ohad Wigman said: “We believe in sustainability and investing in asset classes that have a positive impact on the world we live in. We have the power to create a more prosperous world and invest in asset classes that are not correlated to markets as part of our core assets. We will continue to seek ESG and green asset classes that are also trustworthy professional investments and also have an impact on the world we live in”.