- Small businesses should consider investing in ESG programs to be better stewards of the planet and grow their capital.
Are you a company that is looking to do your part to be eco-friendlier? You aren’t alone. One study found that 96% of large companies report on their sustainability efforts. Many small businesses are also trying to find ways to be eco-friendlier.
So, entrepreneurs of the world, listen up — there’s never been a more crucial point in time to make investments that make a difference to the planet. Right now, you’re likely seeing and hearing more and more about ESG investing. This abbreviation of ‘Environmental, Social and Governance’ refers to private finance initiatives into industries and projects that have a positive impact on people and the planet.
If you want to expand your business and be eco-friendlier, then you need to understand how to invest your resources in eco-friendly and ethical initiatives. Keep reading to learn more about the benefits of investing in ESG initiatives as a growing small business. You should also consider pursuing different eco-friendly business ideas if you are a new entrepreneur.
Small Businesses Are Investing in ESG Programs to Grow their Capital
While it’s all very well that these decisions are coming as a result of the worrying climate crisis, this isn’t the whole story. The bottom line is that this type of philanthropic investing holds a great deal of opportunities for healthy returns while safeguarding the futures of generations to come. As Bloomberg reports, “Global ESG assets are on track to exceed $53 trillion by 2025, representing more than a third of the $140.5 trillion in projected total assets under management”.
Individual philanthropists are making inroads on the ESG front. However, entrepreneurs are also investing more heavily in eco-friendly, ethical initiatives.
So without further ado, we’ve rounded up four of the most promising investments of this type that ethical entrepreneurs can start pursuing today.
1. Citizenship by Investment
Today, many countries offer the unique opportunity for foreign investors to gain citizenship in a destination country in exchange for paying a fixed amount into the nation’s economy — otherwise known as Citizenship by Investment (CBI). The funds attracted from this scheme are commonly used for green and sustainable investments in the public and private sector, often in developing countries.
In the Commonwealth of Dominica, for example, CBI has delivered numerous sustainable developments, such as real estate investments into building resorts for a flourishing eco-tourism sector. The country’s Economic Diversification Fund (EDF) is also largely powered by CBI, and has delivered new hurricane-resilient homes, the planting of trees and the construction of a geothermal power plant. These are just a small number of climate-conscious projects that are facilitated by foreign direct investment.
2. Wind energy
Small businesses can be greener by investing in sustainable energy. One of the most overlooked ways to take advantage of green energy is to harness the power of the wind. Everybody talks about the benefits of solar power, but wind energy has great potential as well.
Wind energy has been on the rise in the last decade. Between 2014 and 2021, for example, the US saw its use of wind power double to 8.4% of total energy production. The Global Wind Energy Council (GWEC) reports that “the volume of annual offshore wind installations is expected to quadruple from 6.1 GW in 2020 to 23.9 GW in 2025, bringing its share of global new installations from today’s 6.5% to 21% by 2025”.
This clean, cost-effective energy source is one of the supreme renewables because it does not generate pollution or require water to function. It also helps reduce our dependence on electricity generation derived from fossil fuels. Onshore and offshore wind farms create jobs too, and since the cost of producing them is decreasing, more governments around the world are incentivising wind energy’s use.
This means further growth in wind energy is highly likely, making investing an increasingly sensible decision. Investors also have a range of options on how to do so: some choose to focus their funds on utility companies, turbine manufacturers or wind farm operators, while others look towards associated logistics and finance firms involved in the production of this renewable energy.
3. Geothermal energy
Geothermal energy is a power source derived from the centre of the Earth’s. Beneath the surface of the planet is a great deal of heat, the most important being that which is produced from radioactive decay of elements in the core. This energy is transported to the Earth’s surface via fluids, travelling through the rock in a network of spores and insulating the heat.
The main reason this is such a crucial power source is that, while the last decade saw huge innovations in renewable electricity, we still need to crack the issue of decarbonised heating. In the UK, for example, 37% of carbon emissions are a result of generating heat. Modern economies remain reliant on cheap gas, so the problem of securing this in a sustainable way will persist long into the future.
As an investor, you may notice a trade-off in only recouping your funds gradually, compared to the fast returns of renewable electricity. However, the situation is always changing, and solid opportunities remain. For instance, if you invest in geothermal stocks, you can profit from price increases in the asset if there are positive developments. Also, because of numerous industry innovations, investing in exchange-traded-funds (ETFs) may see you profit from the general progress in the energy market — offsetting the risk of a single company performing badly.
4. Green transportation
In terms of the need for sustainable alternatives, the elephant in the room continues to be transport. The staggering carbon emissions produced from the vehicles that make up the bedrock of our fast-paced modernised world have given rise to numerous innovations down the years. However, we’re still a long way from widespread affordable electric cars. Does this mean you should stop reading now and start putting your money in Tesla? Not necessarily…
The truth is that there are numerous emerging technologies for you to invest in. Some are going beyond Tesla’s infamous all-electric car, and developing fuel-cell technology that powers cars using hydrogen, rather than drawing electricity from only a battery. Elon Musk may be dismissive, but regardless, this technology is likely to only become more mainstream as time goes on. Elsewhere, you could put capital investment into the manufacturing process of vital components for electric cars, such as battery technology, semiconductor chips, and more.
5. Recycle More Wisely
More companies need to start recycling their old equipment. They often focus on recycling paper and plastic. However, it is also important to recycle e-waste.
You will want to recycle old computers if you don’t want to harm the planet. This will reduce the amount of harmful landfill waste.