Sustainable Investments

The British government recently commissioned Innovas Solutions to compile a researched report, which placed the global sustainable economy at £3.2 trillion over twelve months from 2008 to 2009.

The sustainable economy was broken down into direct environmental activity, with a net worth of £657 billion, the renewable energies sector, valued at £940 billion, and low carbon technologies, a sector attributed with a total value of £1.45 trillion.

The pressing global issues of combating climate change by reducing emission levels, and the need to find viable alternatives to energy produced from finite fossil fuels are the drivers of sustainable investments as an economy.

Low-carbon alternatives to traditional industrial processes and energies are currently a priority of the international community with governments funding research and development as well as the private business community. Carbon taxes imposed upon polluting industry and emissions cap-and-trade schemes, as well as the increasing importance of having a public image as environmentally responsible mean companies are striving to reduce their carbon footprint. This means that there is a strong market for financially viable technology and developments that facilitate carbon efficiency.

The finite nature of the fossil fuels that are currently used to produce between 80% and 90% of our energy needs globally is another pressing concern. Sooner or later we will have no choice other than to use alternative energy sources. Extracting new reserves of fossil fuels as those most accessible dwindle, as well as geopolitical concerns meaning supply can be disrupted is also pushing up prices, impacting business' bottom-line. If one was to be cynical, this is perhaps a stronger incentive for the effort going into developing renewable energy sources.

Which of the two concerns is the larger incentive for sustainable investments is perhaps not crucial. To a greater or lesser extent they are working in conjunction to drive sustainable investment and will have an ever greater influence on how we do business and our day-to-day lives. The economy of sustainable investment is the fastest growing business sector in the world today.

Being based in rapidly growing industries, from a purely business perspective, sustainable investments can be very attractive providing excellent returns. Institutional investors such as funds and venture capital are investing heavily in low-carbon business. Opportunities for sustainable investment range from more established markets such as timber investment to renewable energies, including biofuels and the carbon market.

Financial results connected to sustainable investments have been amongst the best of any investment category throughout the recent recession, and during the recovery period. Below is an example from an Irish company operating in the field of sustainable investment, with concerns in timber investment and renewable energy. Even in a severely struggling economy such as Ireland's over the past few years results were strong for 2010.

Sustainable Investment Opportunities range from the riskier extremes such as the development of cleantech technologies. These can massively profitable if the right choice is made as regards to the technology backed, but not every technology makes it through to mainstream adoption by the relevant market. Forestry investment or investment in established renewable energies offer the potential for good stable returns for those looking to make a sustainable investment but are more adverse to risk.

As with any choice of investment vehicle, when looking at options for a sustainable investment, it is important to weigh up the advantages and disadvantages of every option available. We'll try to provide here an overview of some of the more popular categories for sustainable investments.