Where should green-minded investors put their money? We take a look at new-kid-on-the-investing block, Clim8, and their six environment-focused fund themes
It’s the bout of the century. In the red corner, weighing in at an almighty £17.5tn per year in lost economic output, it’s the undisputed disruptor of the world, and code red for humanity’s existence … the climate crisis!
And in the blue corner, weighing in at an annual maximum of £20,000 of savings per person, with an upcoming deadline of 5 April, it’s the individual savings account better known as … ISAs!
Climate change is pummelling the planet with forest fires, freak floods and heat domes. But here come ISAs, fighting back like a tough, workaday slugger. A strait-laced way to seek a return on your hard-earned cash, ISAs are throwing loads of small punches, giving them an edge. Realistically though, is there any contest?
Research has shown that investing in green and ethical funds can be one of the most powerful ways to bring about collective, meaningful change, without sacrificing returns. Analysis of 745 Europe-based sustainable equity funds from data provider Morningstar has shown that six out of 10 delivered higher returns than their non-sustainability focused counterparts over the last 10 years.
What’s more, research has shown that “greening” your investments is 27 times more effective at reducing your carbon footprint than the combination of ditching flying, using an environmentally friendly energy provider and eating a plant-based diet.
And this is why Clim8 is stepping into the ring. The new, green investment platform aims to put billions of pounds into clean energy and into truly sustainable companies to help floor climate catastrophe.
“By stopping the greenwashing and investing only in companies that are leading the way in areas like clean energy, electric mobility and sustainable food, we can target our investments for the greatest possible good,” says Duncan Grierson, CEO of Clim8. “Nothing less will do.”
Witnessing the planet taking a beating, it’s easy to feel helpless, but even the smallest savings can make a difference. In 2020, the market value of all UK adult ISAs was a record £620bn.
Clim8 is part of the Principles of Responsible Investment network, an independent body supported by the UN, which adheres to six key principles of sustainable investment. It has more than 500 companies and funds in its portfolio, all of which align to the UN’s sustainable development goals.
So it’s throwing its full weight behind businesses that are good for the planet. No fossil fuels, arms or tobacco. Here are the six investment focus areas that Clim8’s ISAs channel funds into, and why money to build up these sectors is crucial.
Fossil fuels currently power more than 80 per cent of the world’s energy. The International Energy Agency says we need to deliver 630 gigawatts of new solar projects and 390 gigawatts of wind infrastructure annually to meet our Paris accord agreements.
Image: Zbynek Burival
With nearly a quarter of greenhouse gas emissions generated by transportation in Europe, fossil fuels power the majority of our vehicles. Not a panacea for all our transport associated environmental trespasses as they come with their own footprint, electric cars will nevertheless need to be scaled up, particularly as the sale of new petrol and diesel cars will be banned in the UK come 2030.
Following a record year for UK renewable energy production in 2020, the deadline to phase out coal from Great Britain’s energy system has been brought forward to 2024. Although the Ukraine crisis has put Europe’s dependency on Russian hydrocarbons into the spotlight, which could spark a renewed reliance on domestic coal, a medium- to long-term weaning off of fossil fuels is nevertheless prudent. Indeed, the National Grid has committed to a carbon-free system by 2025, but further funding is needed for technology such as green energy storage.
Image: Rodion Kutsaev
Unicef believes that climate change and a growing global population will mean that almost a quarter of all children will live in areas of extremely high water stress by 2040. Investment in resource management solutions is needed to help save water and better deliver it across the globe.
According to data website The World Counts, enough steel – to take just one major sector – is produced globally to build an Eiffel Tower every three minutes. It’s responsible for eight per cent of global CO2 emissions annually. If the industry is to hit net zero, the IEA says it requires long-term transformational change.
Investing with Clim8 means supporting 500+ companies and funds through their actively managed portfolios. For examples of the companies in their portfolio that are funding climate solutions under the above themes, please click here.
With investing, your capital is at risk. Tax treatment depends on individual circumstances and is subject to change. This information does not constitute any form of advice or recommendation.
Main image: Micheile