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Green investment areas go mainstream
Before you can buy green you need to understand what an ethical investment or green investment area is. Green investments may include companies that relate to:
- Wind power
- Solar power
- Waste recycling
- Environmental construction and engineering
Many believe that the ethical "high ground" of these investments can mean a trade-off in terms of lower returns, but this is no longer the case. In 2006/07 sustainable investment funds averaged returns of 29 percent, while mainstream funds achieved just 26 percent (check with your advisor for information specific to your circumstances). Some previously ethical investments have even been merged now into conventional funds, so in Australia, at least, ethical and sustainable investments are becoming real money spinners.
Some of the big companies that now offer ethical investments include: AMP (AMP Sustainable Share Fund) , Westpac (Westpac Socially Responsible Investments and the Westpac Landcare Term Deposit), ING (ING Sustainable Investments) and Challenger (Challenger Socially Responsive Investment). Macquarie Bank is also moving into this area - with the launch in 2007 of some very interesting equity funds with a decidedly green tint. It's a new area so a longer-term view may be profitable, not to mention important to the future of the planet.
Shades of green: not everyone is ethical
If you're investing in a "green" managed fund, it would be wise to put under the microscope the companies and sectors your fund considers ethical. This could prove to quite different from your ideals. You may not be supporting the kinds of companies you assume. Another risk of going green is investing in companies that are relatively small, thus, more vulnerable to economic downturns. In addition, there are those involved in emerging technologies, which may prove less viable than they hope - and you first thought - in the long run.
Further, you may be surprised at which companies are considered green. Companies that may have not been so environmentally favourable in the past are now being given the green light if they have taken on board green initiatives. For example, the major oil company, BP, which is working to reduce carbon emissions and address solar and wind power solutions.
It seems, when it comes to socially responsible investments, environmental investments or eco friendly funds as long as you're not too naïve about it, the time for truly green investing may have come - we are looking at the start of an era when this type of investing will sit comfortably with your both morals and wallet.
