The seriously rich are always followed. Now even the colour of their money is getting noticed as new trends emerge. High net worth individuals (HNWIs) are increasing their investment in green technologies, says the World Wealth Report 2008 brought out by wealth management company Merrill Lynch and IT and outsourcing consultancy Capgemini.
Green technology and alternative energy investments found their way into the portfolios of 12% of HNWIs, who have at least $1 million in financial assets, and 14% of ultra-high net worth individuals, who have at least $30 million in financial assets. They made investments through instruments like mutual funds, exchange traded funds, other pooled products or alternative investments.
The figures varied from region to region. The Middle East scored the highest with 20% of HNWIs and 21% of ultra-
HNWIs investing in green technologies. Similarly, 17% of HNWIs and 20% of ultra-HNWIs in Europe, 15% of HNWIs and 17% of ultra-HNWIs in Latin America, 13% of HNWIs and 14% of ultra-HNWIs in the Asia-Pacific region, and 9% of HNWIs and 7% of ultra-HNWIs in North America invested in green technologies in 2007, elaborates the report.
While financial motivation drove nearly half of the green investors worldwide, north American HNWIs were driven more by social responsibility.
The newfound love by HNWIs has resulted in the investment in clean technology, particularly wind and solar energy segments, going up by 41% from 2005 to $117 billion in 2007. Venture capital is quite visible in green business and investment in the sector totalled $5.2 billion in 2007 up from $3.6 billion in 2006. Furthermore, the solar energy segment witnessed the most number of IPOs last year.
In fact, the figures are impressive for both environmental and social investment. More than 70% of the $2.71 trillion Socially Responsible Investing (SRI) assets, which include both environmentally and socially assets, came from institutional investors and HNWIs in 2007. Private equity firms are also playing an important role in green businesses now.
Banks, too, are getting increasingly engaged in green stock market listings. Credit Suisse, Merrill Lynch and Morgan Stanley were involved in deals worth $2.8 billion, $2.4 billion and $2.3 billion respectively in 2007.
The report has stray references to old world companies like Siemens, Wal-Mart and GE, which are pursuing internal environmental-sustainability initiatives, and individuals like Richard Branson. The billionaire hosted a conference of business leaders on his Necker Island in early 2008 to discuss green ventures that would promote sustainability as well as earn handsome returns for promoters.
Green investing is expected to pick up in the future despite recent poor market conditions because investors are driven by considerations of profit as well as social responsibility. It implies that the sector will survive market hiccups and bring in returns over a period of time.
There are a handful of reasons for this optimistic outlook, notes the report. Prompted by diminishing fossil fuel reserves, their rising costs and global warming issues, governments are creating enabling environment for sustainable development. For example, Norway is aiming to become carbon neutral by 2030. Britain is planning to reduce 20% of its emissions by 2010. Abu Dhabi may become the worlds first carbon-neutral metropolis.
Even sectoral initiatives are headed in the same direction. For example, the Leadership in Energy and Environmental Design (LEED) Green Building Rating System has become a popular standard for green buildings in over 40 countries. If these trends are any indication, businesses will go green in self-interest to gain from such emerging business opportunities.
Source: The Financial Express
Published on 21 July 2008