The importance of climate impact investing cannot be overstated. In this article we explain the various forms of climate impact investing and outline four great opportunities how you can make your money work for the climate.
The year 2022 shapes up to break new records highs for global temperatures and natural catastrophe events. Both can be unequivocally linked to climate change. As the world is already well behind the curve when it comes to addressing climate change, the World Bank estimates that $90 trillion in infrastructure investments is required through 2030 to limit the global temperature rise to 1.5°C (2.7°F).
Against this backdrop, privately funded climate impact investing continues to gain in importance. After all, the means deployed by governments are dismal relative to the $90T funding need. By way of perspective, the 2022 US climate bill amounts to just $375 billion while Germany’s budget for tackling climate change is around $80bn.
What exactly is climate impact investing?
Climate impact investing consists of investors employing their investable resources to make a positive impact towards the effort of stopping climate change. Many think of climate impact investing as simply investing in companies that clean up their act, or investing in companies or projects – via startups or green bonds – putting forward the specific objective of reducing CO2 emissions. But there’s more to it – please be sure to read our manifesto on climate impact investing. Voting on climate-related shareholder resolutions is a very powerful form of climate impact investing because it gives a clear mandate to the C-suite to address CO2 emissions in the companies they run.
Everybody wants to invest for the climate. But nobody knows how.
A huge majority of 88% of investors want to invest for a positive climate impact according to the Sustainable Signals survey by Morgan Stanley. This is great news for the climate. There is only one problem. Nobody really knows how to invest with a positive impact the climate. Making matters worse, most people have heard on the other hand about greenwashing and bogus ESG investment products instead. So in addition to getting themselves known, the good impact investments out there now have to overcome a big dose of skepticism. As you will see, the following four options for climate impact investing are 100% free of controversy.
Four great options for climate impact investing
1. Vote your shares on resolutions concerning climate mitigation.
Shareholder participation has the potential to drive a paradigm shift in the behavior of company management towards achieving an environmentally and socially sustainable economy. Many individual investors will say that their vote will not matter in the great scheme of things. This is wrong. If individual investors start to vote in large numbers, companies’ management will take notice. The number of resolutions addressing climate change is growing fast, powered by amazing organizations, such as As You Sow.
So be sure to always take a good look at the proxy voting proposals of your portfolio companies.
2. Invest in ETFs that are focused on green bonds.
A powerful means to allocate resources with a positive impact on the climate are green bonds. Green bonds are tradeable debt instruments issued by governments or corporations whereby the projects are earmarked to finance climate-positive projects. Some obvious examples are renewable energy infrastructure, large scale energy efficiency improvement to residential housing or energy-efficient refitting.
The Ishares Global Green Bond ETF (Ticker BGRN) is a great vehicle for investing in green bonds. It gives you a diversified exposure across 290 private and public issuers with good to excellent credit ratings. The ETF also provides an attractive yield of 5.2% (at the time of this writing) with a very acceptable expense ratio of 0.2%.
This ETF lets you truly make your money work for the climate and earn a pretty decent return on top of it.
3. Invest in climate startups
An exciting option for climate impact investing (beware of the high risk/return profile) consists of funding startups dedicated to reducing CO2 and CO2 equivalent emissions. Ever since crowdfunding platforms were born, startup investing is no longer the domain of venture capital funds or large family offices. With Raise Green there is now even a crowdfunding platform dedicated to climate impact investing.
Starting from as little as $100 this climate-dedicated crowdfunding platform lets you invest in climate change solutions ranging from solar farms on Maui, to water reuse systems in Phoenix or geothermal power installations in Alaska.
Check out Raise Green’s current start up lineup for some exciting, transformative ideas.
4. Install solar panels on your roof and/or retrofit your home
Climate impact investing goes beyond the financial markets. There are a nowadays a number of ways in which you can invest in your own home and achieve both a positive impact on the climate and your wealth. Tax credits at the federal and state level (available in many but not all states) will boost the financial return of such investments even further.
In all, consumers may qualify for up to $10,000 — or more — in tax breaks and rebates, depending on the scope of their purchases. This comes in addition to savings on electricity and heating bills.
Tax credits are available – depending on your location and income level – for the following applications:
- Electric vehicle purchases
- Home efficiency projects
- Solar panels and wind power installations
Get started with climate impact investing today.
There really is no time to lose. Whichever option(s) you chose, get started today.
Corporate boards must be given a clear mandate to tackle climate change. So please vote your shares.
Public resources come up way short. So it is imperative to employ our private, investable resources to finance efforts to stop change climate.
For the sake of full disclosure, we do not get remunerated by any of the companies mentioned in this article.