Sustainable investment; what are the pros and cons?

Sustainable investment is a moniker that covers targeted investments in companies that are tackling the environmental issues facing the global economy. It is about pioneering enhanced modes of business and production, whilst contributing to the momentum of sustainable progress. But are there other advantages to green investment and potentially, any drawbacks?

Being environmentally conscious is an ever increasing priority in modern society as rising water levels, record high temperatures and frightening weather patterns challenge the stability of our cities and states. To combat this, many industries are pioneering technologies that are specifically geared towards counteracting the effects of climate change or at reducing our contribution to changes in Greenhouse Gas levels. Investing in companies that are at the cutting edge of science has always been a potentially lucrative investment strategy, recognising that companies that are looking to the future can be positioned best to grow.

One such company has taken the car industry by storm in the last decade: Tesla . Perhaps the most famous green-tech unicorn, Tesla has achieved stratospheric growth whilst turbocharging the electric vehicle market, leaving most of its competitors struggling in its wake. Delivering massive innovation in both the vehicle and battery market, Tesla has contributed massively to electric charging infrastructure whilst also acquiring SolarCity, another huge green startup and moving majorly into the PV market. This has led to Tesla beginning to offer a homogenous power solution for modern life, providing domestic and commercial solar with powerful storage options and smart energy usage software.

Another cutting edge company that has seen massive growth in the last decade is Impossible Foods , the plant based protein company. Impossible has made some pretty eye-opening claims as regards to its products’ environmental footprint, as compared to their traditional meat counterparts. According to their data, sales of the Impossible Burger in 2018 resulted in close to a billion gallons of water being spared from use in production whilst compared to a standard beef burger, the Impossible Burger needs 96% less land and generates 89% less GHGs.?

ESG, the booming market for environmentally and socially conscious assets has provided a framework with which to assess businesses' impact on the wider world. This system of analysis means that the investor has access to a series of powerful measures with which to consider how well a company’s business practices and ethos fit with their own. One drawback of sustainable investment is that it can require substantial research to determine just how green a company really is. Additionally, some companies have been found to go to extraordinary lengths to game the system, for example using options in the carbon markets to present their business practices as more sustainable than they really are.?

Although ethical investment seems like a no brainer, you have to be prepared to sacrifice access to some potentially lucrative companies in order to commit to your ethical standpoint. However, if we all adhered to this principle, more companies would be forced to modernise their practices and prioritise sustainability, or else suffer from lack of funding and investor hostility. In the world of money, there are never guarantees as to what will give the best returns, but to bet along the side of progress and policy has never been a bad horse to back. Plus, what is better than just seeing a good return on your investment? Being part of an ethical progress and seeing results that make life a little better for everyone.