​​There is no shortage of cash​ - Green investment to surge

There is no shortage of cash. That’s a line I have heard repeated many times over. Along with headlines such as “Green Transition is $50 trillion opportunity”. The big challenge is to match up the opportunity with the means. 

The link between carbon dioxide and global warming was first made in 1856 by physicist Eunice Newton Foote. It wasn’t until a century later that Rachel Carson wrote an influential book about biodiversity, pesticides and poisons. The Green Movement had begun. 

 

Throughout the next few decades, pioneers would invest time and energy in greener ways of living – homes and businesses, energy and infrastructure. Nordic countries invested in energy efficiency and renewables in response to the 1970s oil crisis. Elsewhere, progress was slow. 

 

Investment in green infrastructure increased after the year 2000, with strong leads by China and Germany, particularly in solar power. The UK took a huge leap forward from 2012 to 2015 when it closed most of its coal fired power plant and replaced it with off-shore wind. Wind and solar are now the cheapest sources of electricity in the UK and globally. 

 

Some thought that COVID would have a negative impact on green investment. But it didn’t. People the world over learned more about air quality, healthy buildings and a better quality of life. Then came the Russian invasion of Ukraine. Energy prices sky-rocketed. 

 

The interest and investment in green homes, energy and infrastructure has accelerated once again. Zooming out, one can see the exponential growth pattern that is every investor’s dream. 

Huge volumes of cash are already flowing in. The US government committed $1 trillion to infrastructure in 2021 and then in 2022 $370 billion to green technologies – with the specific intention of luring in further green investment. 

 

The UK government is less generous with capital funding but does run a lot of innovation competitions with green goals. Plus, there is the excellent Catapult Network designed to bridge the gap between the UK’s world-class academia and the successful commercialisation of new technologies. 

 

But it’s not all about government funding. Private money is getting in on the act for various reasons. One of which is the avoidance of risk. Afterall, investing in something that is not sustainable will, sooner or later, lead to some big losses. The Task Force on Climate-related Financial Disclosures (TCFD) is an international organisation with the mission to develop voluntary climate-related financial disclosures that would be useful to investors and others in understanding material risks. However, national regulators (in the UK for example) are now requiring such disclosures in company reporting. Investors are now better informed of the risks and are choosing to invest greenly. 

 

That has covered the funds out there who are looking to increase returns and reduce risk by investing in green. Another source of capital for sustainable infrastructure investments is impact investing. Impact investing is a form of investing with the goal of generating both a financial return and a positive social or environmental impact. Impact investors are often attracted to projects that focus on areas such as renewable energy, water conservation, and waste management. 

The sheer scale of infrastructure projects makes it hard to get them started. An experienced project team is vital. One who can take the project from concept to completion through all its technical and commercial stages whilst managing a wide array of stakeholders. A good team can de-risk the project as much as possible and make it attractive for investors. 

Sustainable investing is an investment approach that puts environmental, social, and governance (ESG) concerns at the core of the investment decision-making process. It seeks to generate long-term financial returns while also supporting positive social and environmental outcomes. 

The benefits of sustainable investing include the ability to make a positive impact on the world, improved risk management, and the potential for greater long-term returns. 

Sustainable investing does come with risks. These include the risk of underperforming the market due to a lack of diversification, higher costs associated with ESG research, and the potential for companies to change their ESG practices. 

There are several ways to determine if a company is sustainable. You can look at their ESG ratings, research their sustainability policies, and review their financial performance. You should also look for certifications or labels that recognize the company’s commitment to sustainability.