Earlier this week, the United Nations released an alarming climate report suggesting that global warming is reaching the point of no return. The report speculates that even the strictest carbon emission cuts will not stop temperatures from reaching 1.5 degrees Celsius above pre-industrial records.
As a response to the growing climate crisis, investing in green funds have increased as companies recognize consumers’ desire to make environmentally friendly purchases.
In the second quarter of 2021, sustainable funds reached an all-time high of $2.24 trillion USD in market assets. This was a 12% increase in one quarter (Reuters).
This increased interest is also a direct result of global market regulators establishing a rating system to measure the environmental efficiency of stocks and companies.
However, thriving markets and thriving green funds are not one and the same. China, a leading emerging market, is drastically falling behind its peers in cutting carbon emissions. Further confidence in green investment funds would be spurred by such government’s actions to make serious carbon emission cuts.
Similarly, the massive fossil fuel industry is seeing a lack of increase in investment funds. Companies recognize that more consumers are voting in green policies with their money.
A similar United Nations report in 2019 ushered in green investment funds, so investors expect to see this trend continue in a similar manner after this week’s report.
Many investors are further ushered by the European Union’s net-zero carbon emission goal for 2050. The European Commission Green Deal wants to move 1 trillion Euros in assets to green portfolios. Similarly, the European Union is seeking to implement tax breaks for investments with low carbon footprints. As of March 2021, every fund based in Europe has to disclose its impact on Environmental, Social, and Governance.
Additionally, Elon Musk, one of the highest net-worth individuals on the planet, runs the renewable energy company Tesla. NextEra, the largest energy company in the U.S., also focuses on renewable energy.
As interest in green investment funds increases, more and more countries implement regulations for funds to disclose their sustainability practices and portfolios. Investors who are reluctant to adapt will find themselves missing out on the growing pockets of green funds.