How to Make Responsible, Environmentally Friendly Green Investments to Fight Climate Change

Climate change has been an issue of increasing global concern in both political and scientific spheres for decades. However, in recent decades with this issue coming into the spotlight in light of an increasing frequency of otherwise ‘freak’ environmental occurrences such as the recent heatwaves, a growing concern for the environment and our impact on it has certainly slipped into the public consciousness. As a result, the climate impact has become a point of consideration in our everyday decision-making. This no doubt has extended to our investment choices, where increasingly, being a ‘green’ company, or one that otherwise makes environmentally conscious choices is a selling point in the investing world. However, the road to hell is paved with good intentions, and ‘greenwashing’ is becoming a serious and prevalent issue, with some trying to trap well-intentioned but less discerning investors into putting their funds into companies with no intention of making environmentally friendly decisions.

The Impact of Climate Change on Singapore

Rising Sea Levels

Rising sea levels pose a significant threat to Singapore as a low lying island. Much of the island is only 15m above sea level, and 30% of the land here is just 5m above sea level.

Water Resources

It is well known among Singaporeans that water management is of immense concern in Singapore, whether it be sourcing potable water sources for public consumption or managing the rainfalls and preventing flooding in urban areas. Both of these tasks could face detrimental impacts from climate change. Periods of drought affects the reliability of our supply of potable water whilst an increase in intensity of rainfall could overwhelm existing drainage infrastructure and cause flooding.

Public Health Impact

An impact of climate change to Singapore that often slips by the public consciousness is the impact it will have on our nation’s public health. Singapore is situated in a region where vector-borne diseases are endemic. In layman’s terms, that means that animal borne diseases such as Dengue are a permanent fixture in the lives of Singaporeans. There is a strong correlation between case numbers of such vector-borne diseases and the warmer periods of the year, meaning that as average temperatures continue to rise and warm periods occupy more of the year, there will be a correlating rise in the cases of such diseases. Furthermore, the increasing average temperatures themselves will be a source of heat stress, and a health hazard particularly for the elderly and the sick.

What Is Greenwashing?

Greenwashing is the practice of presenting, confusing, misleading or even outright false information about a company’s positive environmental impact. An unfortunate reality is that because eco-friendly products charge a premium, playing on the emotions of the consumer rather than the merits of the products to encourage purchase; hence the strong financial incentive for companies to continue the practice. Greenwashing is not a new nor foriegn phenomena, the term being coined in the 1980s and local cases present.

How Do I Spot Greenwashing?

To make an investment decision that forwards an eco-friendly interest as intended, we must be able to separate genuinely environmentally conscious companies from those greenwashing. So how can we spot greenwashing? One way to spot greenwashing is to look out for common greenwashing brand tactics such as:
Fluffy Language & Buzzwords
Companies participating in greenwashing have little to show for environmentally friendly efforts. Their claims of their product’s ostensible environmental benefits will often be vague. For example, describing their product as having a lower environmental impact. In the case that the manufacturer is unable or unwilling to be transparent about the manufacturing process and its associated wates, the reduction in impact can sometimes be miniscule.
Hypocrisies
Greenwashing can also be achieved through deceptive marketing such as marketing a product’s use as sustainable whilst it’s manufacture continues to use environmentally damaging methods.
Evocative imagery
Imagery, such as a picture of flowers growing out of an exhaust pipe, is one market strategy that can be used to imply an eco friendly ethos without making outright claims of eco friendly efforts.
Uncredible designations
One obvious greenwashing tactic is to wrap an inherently environmentally damaging product in marketing designed to imply an eco friendly theme.

Where Can I Make Green Investments?

Online Trading Platforms

One way to start to make green investments is through online trading platforms. Online trading platforms give you access to environmental, social and governance (ESG) mutual funds, index funds and exchange-traded funds (ETFs), which can help you support companies verified to have green practices without sacrificing performance or incurring excessive fees.

Up to 2 FREE AAPL Shares & 15 SGD Cash Vouchers (worth SGD 435) for new clients

Crowdfunding Platforms

Another method for making green investments is through crowdfunding platforms. As an increasing number of consumers become concerned about the environmental impact of products they buy, there is an increasing number of grassroots businesses with the goal of providing their goods & services through more environmentally friendly means than conventional methods. Often these startups are considered small-to-medium enterprises (SMEs). Younger SMEs sometimes have difficulty finding financing, and are hesitant to take on debt because of interest rate payments. Equity crowdfunding platforms give these SMEs a method to raise funds without specific eligibility requirements and without going into debt. This makes crowdfunding platforms a good way to invest in the environmentally friendly startups that you would like to support.

Consider this if
you prefer investing in early-stage startups or list-co bonds

  • Investor Service Fee

    • Unknown for equity, None for list-co bonds
  • Typical Returns
  • Min Investment Requirement

    • S$5,000, must be an accredited investor (net personal assets > S$2 million, annual income > S$300,000) or approved professional investor (S$100,000 annual income & suitability test)
  • Investment Horizon

Trends in Green Investing

The ‘Amazon Effect’

One trend being observed started with Amazon declaring a net zero-emissions commitment through their 2019 ‘climate pledge’. As more companies join as signatories to this net zero-emission commitment, it begs the question, what will these companies do about their suppliers? Supply chain interdependency means a dependency for emissions reduction as well. Top upstream suppliers such as Apple and Samsung have already declared a net zero target, and in Apple’s case, even a decarbonisation target. This domino effect of corporations pushing corporations towards net zero emissions can only increase the value of green investments.

Climate Adaptation

Despite our current and future efforts against climate change, even if we are able to curb its progress, the climate that we live in has already been irreversibly changed. As such an increasing number of climate adaptation projects are becoming necessary in allowing our societies to adapt to this new climate. As the United Nations expects a 5 to 10 times increase in global spending on adapting to climate change, this sector presents much room for growth and a unique opportunity for investors.

How Do Green Investments Help?

Green investing alone will not solve the problems of climate change. However, backing companies and corporations that actively work to address this issue, or at a minimum not exacerbate the negative climate impact of modern industry is a great place to start. Financially rewarding companies that have a positive impact on the environment and our society at large is one way that the everyman can contribute to changing the post-industrial status quo that damages our environment.

Conclusion

As more and more investors pursue not only the best performance, but also want their money to have a positive impact on the environment and society. It becomes important to learn how to invest responsibly so that we do not continue to fund and support irresponsible corporate behaviour that contributes to the ongoing climate issue.

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