From green banking to impact investing, aware_ presents an introduction to ethical investing
Post COP26, when assessing the current state of the financial sector, the familiar expression “put your money where your mouth is” springs to mind. As scientists and researchers become more knowledgeable about the fundamental impact the global economy has on the planet, banks and investors are increasingly forced to align themselves with the UN SDG goals (see below). With awareness amongst individuals and companies rising, there is mounting pressure on the need for movements such as green banking and impact investing.
Ready to invest your money with a clean conscious? aware_ presents an introduction to ethical investing.
According to the report Don’t Bank On the Bomb, German banks invested 11,758 billion dollars in atomic weapons in 2019. In the last four years, 2.7 trillion euros have been invested in fossil fuels. In response to these statistics, we have seen the emergence of sustainable banks; a form of banking that invests in sustainable initiatives and empowers consumers to take positive action.
When the economist Adriaan Deking Dura, the tax law professor Dieter Brüll, management consultant Lex Bos and banker Rudolf Mees gathered to form a study group to ascertain how to manage money sustainably back in 1968, it’s safe to say they were firmly ahead of the curve. These early conversations were incremental in establishing the Triodos Foundation – aimed at supporting innovative projects and companies – and by 1980 Triodos bank had been founded in the Netherlands. In 2004 Triodos had expanded to the UK, Belgium and Spain. In 2020 alone Triodos loaned £8.2 billion to environmental and social projects based in Europe and was successful in preventing 933 kilotonnes in CO2 emissions. Now one of the world’s leading green banks, Triodos focuses ethical investing on three areas: environment, culture and social. To take an example of successful impact, under its environmental endeavours, Triodos lays particular focus on the impact of farming. The bank only allocates agricultural loans to farms that are either organic or in the process of converting to organic production. These stringent guidelines have supported the growth of 32,000 hectares of organic farmland across Europe, which could produce the equivalent of 33 million organic meals a year and fed up to 30,000 people with an organic diet.
Tomorrow bank, a “social business” started by Inas Nureldin, Jakob Berndt and Michael Schweikart in 2018, asks itself two fundamental questions: how can we ensure a good future for us all? And what role does money play in that? In its effort to“use money as a lever for positive change” (Tomorrow), Tomorrow outlines growing food, designing mobility, and producing energy, as the three target areas which require drastic ethical investing. In 2020 alone, Tomorrow customers saved over 28 million euros in costs to society through reducing and offsetting CO2. By investing in green bonds – a bond used to raise money for climate projects – Tomorrow was able to support the development of hydro-powered buses, “the renaturation of the Emscher River in Germany’s Ruhr Region”, and back financing for wind and solar parks (Tomorrow).
Emerging first in 2007, the term “impact investing” has gained traction in the world of finance. In simple terms, “impact investing” is a form of investing “that not only brings financial returns but also has a positive impact on society” (What Investment). Whether investing in renewable energy or in an organisation that provides clean water and sanitation, impact investing is both a philanthropic endeavour as well as ensures financial reward. On November 24th, aware_ was joined by NEXT Generation Investing and Chi Impact Capital for the aware_ x THE HUS.institute conference, two companies with impact investing at the core of their mission.
Chi Impact is a female-founded, independent impact investment advisory firm, based in Zurich. To disrupt the existing systems, Chi Impact encourages both a regenerative economy and increasingly conscious forms of investing when advising its firms. Chi Impact includes the Luxembourg-based impact venture fund BIFF (Burning Issues Impact Fund) in its portfolio. BIFF works to support European entrepreneurs determined to bring about social and environmental change. Their portfolio includes Mosa Meat, lab-grown burgers; Vytal, a company providing reusable packaging; YASAI, a project which uses urban waste as a resource to promote plant growth; and neoom, a company constructing decentralised energy systems.
Whether impact investing in areas of education, affordable housing, or making financial commitments to improve quality of life, NEXT Generation Invest prioritises making a social contribution.
Staying true to its name, one of NEXT Generation Invest’s ethical investment projects addressed the growing need for housing for students at the University of Finance of the State of North Rhine-Westphalia. Especially aimed at providing housing for students from a low-income background, the build employed innovative methods of construction whilst also including the renovation of former barracks. With environmental impact at the forefront of building plans, the project was equipped with grass roofs, solar panels and even integrated nesting places for bats on the buildings, to encourage local biodiversity.
So, whether it’s impact investing in renewable energy or supporting organic farming, ethical investing provides people – with no experience in finance – with the opportunity to support environmental projects that endeavour to protect our planet, not abuse its resources.
by Eliza Edwards