What Is Green Investing?

Sarah Fenwick

Green investing includes green energy stocks and sustainable vehicle stocks because air pollution and climate change are now a high priority in most economies, including the three largest: the US, China and the EU. 

Governments around the world are injecting massive amounts of resources into reducing global warming and putting their power into the future of green investments. Since 2000, most states have gone from indifference to green investments to subsidising them with funds and tax incentives.  

This is likely to support the environment and the sustainable investments sector.  

Green energy 

Green energy includes solar, wind, and other renewable energy sources used to generate electricity or fuel transportation. In sunny countries, solar energy is a viable alternative to fossil fuels and in many cases, the prices are at a par with crude oil or natural gas, especially when we factor in the cost of emissions fines in areas like the European Union.  

The EU plans to reduce net greenhouse gas emissions to zero by 2050 by having a zero-tolerance policy towards pollution and supporting organic farming methods to keep the bloc’s soil clean.  

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What does net zero emissions mean for investors?  

The EU describes climate change as an existential threat and has dedicated one-third of its 1.8 trillion Euro NextGenerationEU budget towards supporting sustainable investments. The bloc aims to tailor its taxation, energy and transportation policies to eliminate pollution and become the first climate neutral continent in the world.  

Around three-quarters of the emissions in the EU come from energy production and the bloc’s 2030 target is to reduce energy emissions by at least 55% percent. The aviation industry is a key sustainable investment sector with the EU pushing for airlines to use biofuels developed by companies like Total and Gevo.  

What we’re talking about is nothing less than a new economic model with massive potential for investing in sustainable stocks. The green economy carries substantive weight compared to just a decade ago. 

What is the NASDAQ (QGreen) green economy global benchmark? 

QGreen is a benchmark that tracks the stocks most closely associated with the green economy. The index began in September 2010 with a base value of 1,000. Since then, it has risen steadily towards the level of 3000 at the time of writing.  

The index tracks 34 components. 

Electric vehicle stocks 

Investors interested in green investments closely watch electric vehicle (EV) stocks. This is not surprising, considering that EV sales outperformed diesel and petrol vehicles in the EU in December 2021. In the UK, sales of Kia’s electric vehicles increased by 130 percent, outselling diesel and hybrid models in January. In the EU, car companies receive subsidies for their EV models and there are tax incentives when they buy an electric vehicle.   

With the weight of consumer spending and government subsidies behind them, electric vehicle stocks have the potential for even more growth.  

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Clean soil investments 

Speaking of growth, governments are searching for sustainable solutions to feed a rising global population, which is expected to reach eight billion in a year from now.

Clean soil is more important than ever but sustainability in the agricultural sector appears to be just as big of a challenge than in the transportation and energy sectors. Still, given the innovations in green cars and energy, the outlook for clean soil is cautiously optimistic.  

One approach is organic farming, which rejects chemical pesticides during the agricultural process. Although it’s growing in popularity, organic produce is still relatively expensive and it is not meant for large-scale agricultural projects. The difficulty for scaling up organic farming is the lack of viable alternatives to chemical-based fertilisers and pesticides. In order to feed more people, the soil is worked intensively with these chemicals but in the long term they pollute the earth.  

It’s reasonable to expect that governments and investors will be on the lookout for chemical-free fertilisers and pesticides. In the long term, these will benefit the ground soil and reduce pollution. 

A start has been made – the organic fertiliser market is expected to reach 15.9 billion USD by 20271.  Italpollina and Biolchim are active in the EU. California Organic and Sigma Agriscience offer organic fertilisers in the US. Multiplex Group and Paras Biotech (Tata Chemicals) develop and sell biofertilisers in India.  

Biofertiliser producers likely face the twin challenges of time and transparency at this stage of their development. The time to reach critical mass and transparency in the sense of providing historical performance and stock exchange listings to investors.  

The green investments that have made more relative progress are the energy and transportation sectors but biofertilisers also have a promising future as climate change policies become more embedded at the governmental, societal and investment levels.  

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The Analysis is prepared by an independent news & economics analyst, Sarah Fenwick (financial writer), (hereinafter “Author”) based on their personal estimations.     

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