Myriad of opportunities to invest in 'green' issues
ONE of the most notable positives to have come out of this coronavirus experience has been the massive fall in global pollution during lockdown. As so much travel has ground to a halt, pictures of clearing skies have made for an unexpected positive.
It is an issue that will not go away. When I last wrote about green investing several years ago, green funds were regarded as non-mainstream and would involve sacrificing performance. But his is no longer the case and not a day goes by for professional investors without some reference to ESG (environmental, social and corporate governance) factors.
In particular, there is a growing awareness amongst younger investors that there is a real opportunity to put your money to good use away from the more traditional companies.
Most companies are now very conscious of their ESG rating and most investment managers are able to provide an ESG rating on a managed portfolio – something that is particularly attractive to charity funds.
We are clearly all much more aware of climate change, but there are still some serious causes for concern, such as Donald Trump withdrawing from the 2016 Paris Climate Agreement. There is clearly a conflict between the interests of some of the traditional industries and the commitment to reduce emissions.
Although a great many countries have forged ahead with their efforts to limit the rise in global temperature, there are now concerns that the amount of money that has been spent to combat the impact of Covid-19 will limit their ability to fight climate change.
For investors there are a myriad of opportunities to invest in so called “green” issues. Firstly the choice in terms of ethical funds has risen exponentially over the past few years, with sustainable funds available across different geographic areas and asset classes.
There is a whole category of alternative energy funds which are now regarded as defensive and often provide a relatively high and sustainable income flow: a very welcome characteristic in these uncertain times, although some such areas are bolstered by a high level of subsidies. Such funds also provide a welcome diversification away from the more traditional equity class.
There are also opportunities in individual equities: witness the interest in shares which promise alternative forms of power for transport, for example. There has also been a global shift in attitudes to plastic and this too provides opportunities to invest in companies which offer more environmentally friendly alternatives.
Many of these new and alternative technologies are in the early stages and therefore carry a higher degree of risk, being unproven yet. However, this is a theme which seems very unlikely to go away and perhaps the lockdown has provided us all with the opportunity to reassess priorities.
Only time will tell how the new normal will turn out but it is too important to dismiss and while the world economy struggles to recover, a paradigm shift in our approach to energy and sustainability seems to be imperative.
:: Cathy Dixon is a partner at the Belfast office of Cunningham Coates Stockbrokers. This article does not constitute a recommendation to buy or sell investments and the value of any shares may fall as well as rise.