Money is pouring into sustainable investments in Europe. More than 37 billion euros went to green investing in just Q1 of 2019, according to a recent report in Morningstar.
So, what exactly is green investing? The generally accepted definition is an investment strategy that considers traditional financial analysis together with three other factors – environment, society and governance. This is referred to as “ESG investing.”
Germany is at the forefront of ESG investing, according to a recent post on Investment Europe, with more than 50 percent of institutional investors applying ESG principles to asset allocations. Family offices and foundations are even more active, with 73 percent ESG allocation.
Increasing, the market is creating innovative and business-led ESG investment models and solutions to drive investment.
One example is the Frankfurt-based Finance in Motion which brings together public and private institutional investors to develop and advise enterprises as they drive social and environmental change in Latin America, Southeast Europe and Africa.
FiM has invested more than 4 billion euros to date. The funds are assisting bring effective and lasting grassroots changes.
Examples include the micro fund helping women in Jordon create businesses and achieve their goals. Another example is the European fund which assists budding entrepreneurs in Sarajevo, Bosnia and Herzegovina.
Yova is another ESG player. This is a Swiss-based online platform allowing users to save and invest in sustainable enterprises with funds directed towards renewable energy, medical technology, gender equality, human rights and more.
The Yova platform creates individual strategies for its investors based on their profile, then invests their money in sustainable enterprises such as Infineon GmbH – a German semiconductor company supplying parts for self-driving cars and leading the way in cybersecurity.
In the Netherlands Wijnand Pon, co-founder of Dutch conglomerate Pon Holdings BV, has established a foundation to invest in large-scale and long-term land restoration projects … the definitive green investing.
Pon’s foundation is called Commonland and has an ambitious mission to transform degraded landscapes into thriving agriculture ecosystems and communities. What is interesting is the strategic business case the foundation is adopting to help fight climate change.
Land degradation is one of the world’s great problems with about 25 percent of land in a degraded state. When land is degraded, soil carbon and nitrous oxide are released into the atmosphere making land degradation one of the largest contributors to climate change.
Scientists have predicted that up to 24 billion tons of fertile soil was being lost each year due to unsustainable agricultural practices. If this trend continues, 95 percent of the Earth’s land areas could become degraded by 2050.
Commonland is dedicated to working with global partners to transform 100 million hectares of degraded land by 2040. It will do this through a unique blend of profit and purpose that may well be a model for other family offices and high net worth individuals.
(Editor’s note: Matthew Reynolds is a consultant for Wide Open Agriculture Limited.)
In July 2018, Commonland became a foundation shareholder of the world’s only publicly listed regenerative agriculture companies – Wide Open Agriculture Limited. WOA was established in Australia to transform degraded land, restore biodiversity and create a strong, sustainable business.
Wide Open Agriculture offers a glimpse into how profit-plus-purpose investment vehicles will be structured in the coming years. WOA is a publicly traded enterprise with a sustainable, vertically integrated business model and a goal to deliver positive, measurable impact on the ecosystem and environment.
A large family office is already on the register as one of the founding shareholders and WOA already is delivering cash flow and making a positive social and environmental impact.
The message is clear – ESG investing is now mainstream. Institutions, family offices and investors increasingly demand active participation.
They are not content to passively sit by and invest or donate in the hope change eventuates. They want to be part of the solution and derive financial benefits from creative, innovative, sustainably driven green investing.
About the author:
Matthew Reynolds is an accountant, management consultant and virtual CFO living in Frankfurt.
Matthew is available to work with expat companies and businesses requiring assistance in Frankfurt or global companies seeking to expand operations to Australia.