World's wealthy are investing green
Heightened interest in the environment is driving an increase in green investment by the wealthy, according to a recent report.
The World Wealth Report, from Merrill Lynch and CapGemini, examines trends in the high-net-worth (HNW) ‘marketplace’.
Globally, there are now over 10m people worth more than $1m, excluding their main residence, and over 100,000 with more than $30m. The wealth of HNW individuals increased almost 10% in 2007, to $40.7 trillion, driven by market capitalization growth in emerging economies. For the first time in the history of the report, the average assets held by HNW individuals exceeded $4m.
These wealthy investors increasingly are seeking opportunities to invest in green initiatives. Globally, 12% of HNW individuals (those with $1m or more) and 14% of ultra-HNW individuals (those with $30m or more) invest in green technologies, although this figure varies significantly by region. Green investing is highest in Europe and the Middle East, where 17-21% of investors allocate part of their portfolio to green technologies or alternative energy sources. This contrasts to only 5-7% participation in North America.
Prominent examples in the UK include Zac and Ben Goldsmith, featured in the recent Wealth Bulletin Eco-rich list, who invest in sustainable projects for strong returns as well as preservation of the environment.
Motivations also vary. Worldwide, roughly half of wealthy investors cited financial returns as their primary reason for green investing, while North America was the only country where social responsibility was the primary driver.
Opportunities for green investment are set to increase. The report points to a number of government-led initiatives, such as the UK’s efforts to introduce legally binding CO2 reduction targets, and the explosive growth in clean technology investment, which totalled $117 bn in 2007, up over 40% since 2005.
Also driving these trends is a growing array of vehicles through which to invest in green technologies, making such investment much more accessible. These include mutual funds, pooled products such as exchange-traded funds (ETFs), as well as alternative investments, such as the Triodos Renewables Energy Fund.
Summarising growth potential for the area, the report predicts that, “Ultimately, the unilateral pursuit of economic progress against a backdrop of sustainability will be driven by consciously aligning investment choices with values and concern for the environment.”