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How Millennials And Zoomers Are Going Green With Investing

“Go Green” is more than just a trending motto.

It is a serious cause, and Millennials and Gen Z alike, are committed to this cause.

In fact, going green is so important to young investors, that it has successfully found a place in the world of investing as well!

Today, we’ll talk about what it means to go green in investing and see some of the key features and benefits of green investing for young investors in India.

What is Green Investing?

Green investing is also known as sustainable investing or socially responsible investing. It is a form of investing that allocates your money towards funds from companies that hold sustainability, environmental responsibility, and ethical practices high up in their list of priorities.

In the most fundamental sense, green investing is a conscious approach to investing that seeks to generate financial returns for investors, while parallelly promoting positive environmental and social change – something that is very appealing to the socially conscious investor (so… hopefully all of us!).

Features of Green Investing

There are some features that are unique to green investing that add a lot of value to the investments in the mind of an investor. Here are some that you should absolutely know about – 

  1. Eco-Friendly – Green investments make environmental considerations. It means that an investor’s money is going to get invested in companies that are actively implementing eco-friendly practices, are working to reduce their carbon footprint, and are taking precautionary and preventive measures to minimize the harmful effects that industries are known to have on the environment.
  2. Social Responsibility – The world of green investing is not limited to the environment. As we said before, “Go Green” is more than just a motto. It is an all-encompassing concept that extends to us – the people who are a part of our environment. As such, it is important that humane labor practices are upheld, and no human rights are violated at the companies where we are investing. 

(Note: Both these points can fall under ESG investing – a related investment option for you to check out!)

  1. Ethically Screened – Green investment funds go through their own screening process to be classified as such. Companies that do not meet certain criteria or parameters are excluded from being listed as green companies, and as such cannot offer the benefits of green investing to you. Industries like fossil fuels and weapons manufacturing are good examples of companies that are not offering you green investment options any time soon!
  2. Impactful – Green investing is not only gratifying for the investor, but it often puts in motion real change. Since green investors seek to create a positive impact alongside financial returns, such funds prioritize investments in ventures that address pressing global challenges, such as climate change, pollution, and even social inequality. It is important that younger generations always strive to make a change through all their decisions – investing included!

These features are responsible for the growing popularity of green investing in India. During the period of 2017 to September 2022, 15 Indian corporates have issued green bonds of value ₹4,539 crore (Source: ET) – and this is just the public investment sector!

So, it is safe to say that this number is going to rise for the foreseeable future (as more and more young investors like you start taking over the market share!).

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Benefits of Green Investing

With these staggering numbers, and promising projections, it is crucial that you – the investor – understand the benefits of green investing. Here are some important benefits that we think might be appealing to you – 

  1. Long-Term Growth Potential – This is definitely appealing to us! Green investments often align with long-term growth trends, like the much-needed transition to clean energy, sustainable agricultural practices, and emerging and innovative eco-friendly technologies. Compound the fact that these are growing spheres with… Well… Compounding, and you’ve got yourself a recipe for long-term wealth creation!

     

  2. Risk Mitigation – It is prudent to avoid investing in companies that are repeatedly failing ESG standards. By avoiding companies with poor ESG records, you can effectively reduce your exposure to potential legal, reputational, and financial risks (phew!). Companies that prioritize sustainability are often better equipped to weather economic and environmental challenges because, in the long run, these companies are a benchmark for others that are willing to follow suit.

     

  3. Competitive Returns – It is a widespread misconception that green funds or ESG funds underperform. A quick search of your own will inform you that there are numerous studies that support the notion that not only can green investments match solid players in the market, but have the potential to overtake them in the long run. And if you can facilitate real change alongside making big gains – that’s the ideal situation, isn’t it?

     

  4. Diversification – You can look at diversification with respect to green investing in one of two ways. Firstly, there are a number of asset classes and investment horizons to choose from when investing in green companies. You can choose from a pretty robust portfolio of options! But, secondly, you can look at investing in green funds as an effort to diversify your portfolio in itself as well. We’re only seeing victories here, guys! What about you?

Young investors are going green with investing because they are tuned into the fact that as society continues to prioritize sustainability and ethical practices (much like these investors themselves!), companies that excel in these areas are likely to attract more customers and investors. The awareness and consciousness of young investors can easily be credited to being the driving force that has made green investing a whole new sphere of financial markets.

By getting involved early, you are positioning yourself to secure your financial future, and also contribute to the positive future of the environment and even society as a whole. We like to think that just like investors benefit from compounding in the long run, so will the planet, with the right investors, making the right investments, at the right time!

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