Definition Of Green Investment
Green investment refers to the act of allocating capital towards projects whose purpose is to benefit the environment. This financial operation can be carried out by individuals, equity firms, hedge funds or corporations as well. The projects at issue, moreover, can regard:
- Waste management
- Pollution reduction
- Water resource management
- Protection of the ocean
- Alternative energy research
- Fossil fuel reduction
Breaking Down Green Investment
We live in an era when sustainability and ethics represent actual and pressing matters. Investors, customers and stakeholders in general, in fact, take into great account how companies perform under specific CSR indicators. Do they engage in socially responsible activities? Do they promote causes and develop business models primarily focused on the pursuit of global welfare?
One way organizations worldwide can deliver a social and beneficial impact is through environment-friendly policies. That is, engaging in activities and projects that aim to safeguard and protect the surroundings.
As aforementioned, companies can be sustainable and “green” in multiple ways: they could try to reduce energy consumption in their offices or in their manufacturing plants, for instance. Also, they could advocate and promote social causes that aim to inspire change within the population regarding the safeguard of the environment.
Again, some organizations may want to encourage employees to be in turn more respectful, careful and considerate towards the ecosystem, by recycling, reducing water waste and so on.
Another model of “corporate environmentalism” comes from the car industry, where more and more companies are committed to entirely switch to electric cars within the next ten years. Other corporations, furthermore, such as Google, vow to become wholly sustainable and to reduce to zero the emission of fossil fuels.
All these examples, in essence, show how businesses worldwide understand the importance of implementing policies that aim to help the environment. In this way, they attract more capitals from those investors that want to make a real and tangible impact with their investments.
Financial operations that aim to sustain those organizations helping the environment are correlated to the concept of impact investing. The latter means “the act of pursuing both a financial and beneficial return, by investing in social and environmental projects”.
Impact investing is an emerging trend that is attracting more and more attention. Many investors are willing to finance innovative projects and thus accept lower interests if this is offset by the delivery of a social and measurable impact. That is, they prefer to financially support those organizations that show a commitment to make a difference with their noble initiatives.
The way beneficiaries of the financing can convince investors of the virtue and integrity of their mission is through a business model that clearly defines objectives, strategy and indicators. This way, they can highlight the benefits of their initiative. It’s important, in fact, for the impact investors, to make sure that his money will eventually generate a real impact.
The said business model needs to include these points:
- Analysis of the market – opportunities, risks etc.
- Goals, objectives and KPIs of the project
- Implementation plan
- Financial projection
- Social and beneficial return