Sustainable investments are in vogue because they can make a decisive contribution to the development towards a climate-positive society. Investing is no longer just about returns, but about achieving a positive social and environmental impact and acting responsibly and with an eye to the future.
After all, invested money does not lie idle in a safe deposit box – it is used to implement specific projects. Investments that flow into fossil fuels or polluting industries will face increasingly higher costs and regulatory barriers in the future. This makes sustainable investments not only ecologically and socially, but also economically more attractive. They offer greater security in the long term than conventional investments.
With your own money, you can choose what you want to promote according to your values. There is a wide range of investment opportunities, five of which are presented below:
1. ETFs (Exchange Traded Fund)
ETFs enjoy great popularity and are considered a favorable as well as long-term investment. On the finanzen.net platform, there are recommendations on the most sustainable ETFs and funds, each of which has been evaluated according to ESG (Environmental Social Governance) criteria. However, uniform standards for the preparation of ESG ratings do not yet exist. Most people assume that so-called “green” ETFs support companies that have a positive environmental and social impact, but this is often not the case. With ETFs, only the “best in class”, i.e. the “most sustainable” of an industry, are selected, which means that companies from the most environmentally damaging industries, such as the oil industry, can also be found in “sustainable” ETFs. Moreover, ETFs invest indirectly in companies, so an investment does not trigger active action to combat the climate crisis.
One well-known way to invest money is in stocks. Investments in companies from the solar energy, wind and hydropower or waste reduction sectors are experiencing particularly strong growth and offer themselves as sustainable investment opportunities, for example. Shares enable direct support in selected companies whose sustainability values match our own. Although voting rights are acquired, they are too small for individuals to have any influence on the company. In order to engage in Active Ownership (use of acquired voting rights to influence corporate decisions), retail investor:s must join forces here. As a general rule, investing in equities is a good idea even in times of crisis. The more long-term one acts here, the more likely it is that cyclical and economic fluctuations in the share price will be cushioned.
3. impact investing through crowdinvesting
Essential to impact investing is a focused strategy and intention to create social and environmental benefits through the investments. Direct investment in individual projects that deliver this benefit or growth financing in companies that share this mission will help achieve the desired impact. Crowdinvesting generates returns for investors, it is not a donation. Here it is possible to invest directly in self-selected projects. It is crucial that the impact achieved by the investments is measurable and transparently disclosed. Through crowdinvesting platforms, small private investors can participate in renewable energy and other profitable and sustainable projects around the world with low minimum amounts.
4. (Active) Impact Funds
The selection of actively managed funds that claim to be “green” is steadily increasing. As with ETFs, it is worth taking a look at the fund composition, i.e. the companies or projects in which investments are made. The Forum for Sustainable Investments (FNG), for example, which awards transparency seals for sustainable funds and ETFs and publishes a sustainability profile accordingly, can help here. This can help in the orientation and selection of investment funds. In addition, the sustainability criteria of the funds can be viewed.
5. call money / time deposit accounts
Another option is to invest in overnight deposit or time deposit accounts. They are suitable for investors who do not want to invest their money for the long term, but want to have it available quickly. They do not currently yield the interest that inflation offsets the devaluation of money. The interest rates usually correspond to the conditions of the branch banks, which are based on the prime rates. Nevertheless, they can vary depending on the bank, which is why a comparison is worthwhile in any case. Utopia offers a good overview of various green banks that have been awarded the ECOreporter seal for sustainable banks and have been rated 80 percent or higher in the FairFinanceGuide.
While greenwashing is a major problem with large funds and ETFs and investors cannot decide for themselves in which companies they invest, alternative investment options such as microfinance funds or crowdinvesting offer opportunities to achieve a measurable impact and bring about concrete improvements – for example by building solar plants. In addition to transparency, measurable positive impact is one of the most important characteristics of a sustainable investment.
About the author
As Head of Fundraising at ecoligo, Claudia Rothe brings ecoligo's direct investment opportunities in renewable energy projects to life for private investors. With her involvement in project development, crowdinvesting and investor communication, Claudia oversees the entire spectrum of sustainable investing to enable private investors to contribute directly to the global energy transition and a greener future.
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