Climate change is the hot topic right now, with the hottest July on record now behind us (2020), people are increasingly looking to act responsibly in order to to help take action. The good news for investors is an increase in the number of investments from the private sector that support technological solutions to the rising problem of climate change and the best news is that you can support the movement against climate change, without taking a hit to your bottom line. In fact recent figures have suggested that sustainable funds are now outperforming their conventional counterparts giving investors all the more reason to engage in ethical investments.
Whilst there are investment platforms that will focus on ethical investments, without any extra effort on your part, if you would prefer to stick with your current provider, there are steps you can take to ensure that you are investing in line with climate change.
The first step is to reduce your risk. This acts to eliminate your investments in entities such as oil and gas, historically a lucrative but often risky investment that can experience large fluctuations in price, often occurring on a daily basis. Reducing your risk can also reduce your exposure to companies with a heavy exposure to coal as well as highly polluting industries.
An even more effective way to address the issue of climate change is to actively seek out investment opportunities in companies that directly contribute to a greener society. There are several green funds available today that are working towards innovations to reduce greenhouse gases including Green Energy ETFs. This is considered a growth market, and investors can support this venture without having to sacrifice returns, however experts warn of market crowding, a lesson taken from the 2007 when the wind and solar market began offering poor returns, despite a period of extreme growth. A crowded market will always result in poor margins.