How can investors create a carbon-friendly investor profile?

Investments in sustainable or green bonds have been rising throughout the world. India is no exception. The country launched its first sovereign green bonds on January 25, 2023.

In light of that, what should a retail investor keep in mind while choosing sustainable investments? How can they create a carbon-friendly investor profile without affecting profits? In this podcast, Nabodita Ganguly interacts with Govind Sankaranarayanan, co-founder and COO at Ecofy, to understand how retail investors can go green and the first step towards starting it.

Sankaranarayanan explains that retail investors have several ways to choose sustainable investments. One option is to invest in environment, social, and governance (ESG) funds offered by mutual fund houses. These funds are prohibited from investing in environmentally unsustainable or poorly governed companies. Another option is to explore specific FinTech platforms that curate pools of sustainable assets, such as rooftop solar installations or electric vehicle loans.

Additionally, he suggests considering green bonds issued by companies or even sovereign bonds, which support sustainable projects. Retail investors can also participate in angel networks that focus on green technologies or sustainable industries like agriculture and transportation.

When selecting a particular sustainable investment strategy, investors should consider the asset class involved. For green bonds, the risk is usually lower since they are issued by well-regarded and large issuers. Mutual fund investors should analyse the portfolio’s composition and ensure it aligns with their risk profile.

Regarding the risks associated with green investments, Sankaranarayanan highlights that the risks are lower in sustainable investing compared to avoiding it.

The global transition towards emission reduction and resource efficiency, driven by government policies and customer choices, favours sustainable industries. Moreover, the growing desire among millennial consumers for a sustainable lifestyle further supports the upward trend in sustainable investments.

To avoid greenwashing, where assets are falsely presented as green, investors should look for certifications from regulatory bodies and understand the investments’ details. Although some greenwashing may exist, being well-informed and conducting due diligence can mitigate this risk.

For those starting their sustainable investment journey, Sankaranarayanan recommends considering green bonds, and ESG funds, or consciously choosing industries like solar and wind energy, electric transportation, water management, and waste reduction. Additionally, he suggests embracing sustainability in daily life, such as through the adoption of electric vehicles and energy-efficient devices. Listen in.

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