‘Green and Investment’ when put together would not only provide you with financial stability but save the earth too!
In day-to-day life, becoming eco friendly is a conscious decision that many of you must have taken or must have thought to take. The prime aim to follow eco-friendly practices is to save the planet from the cruelty of pollution.
Am I correct?
Be it saying no to the plastic straws, switching to jute bags for buying groceries, as an individual there is a range of habits you and I can change to ensure that mother Earth is green!
But, hold on!
What if I tell you there is an interesting and even wiser way to make an eco-friendly choice?
And, that way is to ‘go green’ while investing your hard-earned money.
So, for all the investors looking to include stocks from a sector that has good growth potential, Green Investing could serve your purpose.
Hearing that for the first time?
Wish to know more?
Well, Convey is there to enlighten you. So, read ahead to know more about Green Investing or Eco-Investing.
The human race is surviving in such a time and era where sustainability has become a pressing concept. In the past several years, investors (be it retail, HNI’s or institutional investors) have become more conscious of their investment choices. They want to know anything and everything about the company they are willing to invest in.
In fact, some of them not only look for strong financials but they try to probe if a company takes part in socially responsible activities, or if it cares about global welfare at all?
This trend is gaining momentum and supporting evidence of this fact is the recent research carried out by asset manager Lionturst. According to the conducted research, around 74\% of the private investors have said that ‘sustainability is important for them and they would like to include green stocks in their portfolio and 43\% were already investing in such stocks.
So, what is this green investing which is gaining buzz among the investor’s community?
In technical terms, green investment is defined as the investment made in stocks of such companies (or projects) whose operations revolve around either conservation of natural resources, production of green energy, or are committed towards sustainability of the earth.
In order to understand the concept of green investing, have a look at the definition given by the International Monetary Fund.
‘The investment which is needed to reduce the greenhouse gases and air pollutant emissions without reducing the production and consumption of non-energy goods.’
The green investment can be made in ETFs, mutual funds and bonds. Some example of the same include:
Some renewable energy stocks to invest in - Adani Green, Tata Power Company, JSW Energy, Azure Power Global Limited, etc.
In order to have handled the environmental damages that have been done already, it is important that people start with making small changes towards making the earth a better place to live.
One small step investors can also take in form of including such companies in their investment portfolio whose operation revolves around either sustainability, renewable source of energy, or environmental protection (directly or indirectly).
There are several advantages of the concept of green investing and those are:
Having illustrated the advantages of green investing, make sure that you do not fall prey to companies that just showcase themselves as a flag bearer of environmental causes. Make sure to do your research regarding the policies they follow and pledges that have made.
I am pretty sure that until now some of you must have developed an interest in exploring the concept of green investment or incorporate it with your investment choices.
But, how would you begin?
Confused about taking the first step in this direction?
What are the available options or areas where you can spot green stocks to include in your respective portfolios?
Read ahead to find out the answers!
Green investment can be spotted easily in many investment vehicles like stocks, mutual funds, exchange-traded funds, etc.
In this section you can get a detailed knowledge of the best green investment opportunities can bet on. But, before that, I would like to make a mention of an important point.
For each individual, the definition of ‘green investing’ varies. For instance, one set of investors might want to invest in companies that work for the betterment of the environment like the production of renewable energy. Whereas, another set of investors might want to invest in businesses that follow green practices and adopts practices that do not harm the environment.
Therefore, everything boils down to your understanding of the concept of green investing.
Now, let me tell you about the opportunities you can explore in the green investing arena!
The champions of environmental protection have always pitched about alternative sources of power. Given below are the top choices for green power investments.
How many of you read this fact in school that Earth constituents of 70\\% water but drinkable water is only.
All of you, right? Being one of the most important natural resources, water’s scarcity can’t be afforded by the human race. Sadly, climate change is resulting in major losses and places like Cape Town (South Africa) have suffered or are suffering the fear of running out of freshwater.
So, some major investment options around the world, as far as water stocks are concerned, include Essential Utilities, American Water. Apart from these, there are mutual funds like Calvert Global Water Fund, AllianzGI Water Fund, where you could consider investing for a good cause.
When it comes to alternative and cleaner sources of power generation, you definitely cannot miss the mention of solar energy.
If you are interested in putting your money into projects or companies that either built solar panels or provide installation service of the same, you can go with solar energy stocks.
Some examples of the same include Sunrun, Invesco Solar ETF, Enphase Energy, etc.
The concept of electric vehicles as a cleaner alternative to fuel-based vehicles has been lingering around for quite some time now. With the rise of Elon Musk’s Tesla the companies involved in the production or manufacture of greener vehicles, batteries etc make it an attractive choice for investment.
Some example of companies that have entered the EV segment and are listed include - Mahindra & Mahindra, Ashok Leyland, Vedanta, Tata Motors, Hindalco Industries Limited, etc.
So, if you want to include such companies in your portfolio that are trying to create vehicles that pollute (due to the combustion of fuel) the environment the least, then you can consider the above-mentioned stocks.
Apart from these investment opportunities, you can also look for companies that are involved in waste management and handle the work of recycling and processing of wastes like paper, metal and glass.
Examples of such companies include Eco Recycling Limited, Antony Waste Management, Clean Harbours, etc.
So, without further -ado, hop on to these green investment opportunities in order to contribute your bit towards environmental protection by making informed investing choices.
I would like to begin this section by giving a statistic that most of you might not be aware of!
During the fiscal year of 2017-17 and 2017-18, the green investments made by Indian investors surpassed growth in India’s GDP in the same fiscals. In 2016-17, the green investment worth $17 billion were made whereas in 2017-18 the total value of green investment shot up to $21 billion. These investments were made in a wide range of companies that either opted for cleaner operations or whose operations aided environmental protection.
If you are one of those investors who really want to step into the green investment world then have a look at most potential sectors in which you can invest your money.
The energy sector of India is one of the fastest-growing industry and in recent times the investors have become active with their investment in this sector.
One of the most striking thing that happened 4 years back in 2017 was the total investment made in projects pertaining to renewable energy. For the first time in India, the investment in clean energy (renewable energy) surpassed the investments made in fossil fuels. Well, that was a historic moment!
Be it solar power or wind power, if these cleaner sources of energy are put to full use in India with Government’s support, then we can present a great example to the world. At the same time investor can invest in renewable energy stocks such as Adani Green Energy, Tata Power Company, etc.
With the entry of Tesla in India in 2021 and other companies foraying into the effective vehicle space, it would be a great opportunity for the investors to put in their money (as an investment) in this sector.
But, unlike the renewable energy sector where the Indian government has been enthusiastic enough to push it forward, the electric vehicle space still needs more attention.
For instance, in the current situation when social distancing has become a necessary evil and the buying capacity of consumers has declined, many working individuals would opt for two-wheelers for commuting. The government could have pushed the idea of electric vehicles under such circumstances.
Nevertheless, still, sustainable transportation space has the potential to grow in India in the coming future and attract green investments too.
So, if any kind of green investment passes through your eyes, try not to miss it out and include it in your respective portfolios.
In all the former sections, I spoke in lengths about the definition, examples and opportunities of green investments. But, there is a certain level of risks associated with it as well and so as to make sound investment decisions you must be aware of them.
Firstly, the green investment segment is still naive as compared to stocks of other sectors. Factors such as a massive fall in the economy, constant fall in the price of fossil fuels or decline in the important environmental protection could lead to a slowdown in the green investment segment.
Furthermore, the above-mentioned factor would lead to falling in the share prices and the return on investment of the investors will get impacted.
Therefore, it becomes vital for you to acknowledge these risks before investing by thoroughly carrying out the financial analysis of the companies and at the same time do in-depth research on how green investing works.
Looking for easy lessons on Fundamental Analysis, tap the doors of FinnovationZ Convey!
Until then keep investing!