Investing in Green Initiatives

Article originally published on Informed Investor, written by Olive Coulson - Mindful Money's Marketing Manager

In today’s world, where the health of our planet is on everyone’s mind, there’s a growing way to make a real difference – through green investing. This isn’t just about throwing money at a problem; it’s about strategically putting your funds where they can have an impact, while also earning a return on your investment.

There are two main ways to use your money to support the green economy: investing in unlisted companies, where your support could be the make-or-break factor in getting the projects off the ground, or investing in publicly listed companies that are purpose-driven and looking for more investment to expand.

In this article we will cover the different ways you can support growing the green economy in New Zealand

Unlisted companies: Supporting a green future

Unlisted companies in NZ often represent the cutting edge of green technology and innovation. These startups and projects might be in the early stages of development but hold the potential for significant environmental impact and financial returns.

Investing in these ventures is inherently riskier due to the lack of public financial data and the uncertainties of early-stage growth, but the rewards can be substantial, in terms of financial gain and environmental impact.

Companies like Lodestone, SolarCity, LanzaTech, All Good Organics and Ooooby stand out as pioneers in this space. When companies are starting up and raising a small amount of capital, they may invite investment through platforms such as Snowball or PledgeMe. However, unless you qualify as a wholesale investor (because you have a large value of investments or specific expertise) you can’t invest directly in unlisted companies raising larger amounts of capital.

How to invest in unlisted companies

Exposure Through Managed Funds: Examples include Booster Innovation Fund, Generate, Simplicity and Pathfinder.

Exposure Through KiwiSaver Funds: Simplicity, Pathfinder, Generate KiwiSaver.

Impact Investing Funds: Impact Enterprise Fund, Purpose Capital, Soul Capital, The Climate Venture Capital Fund. To invest in these funds you need to be considered a wholesale investor.

Platforms to access unlisted companies: USX, Equitise, Syndex and Catalist for wholesale investors and Snowball and PledgeMe for smaller capital raises (under $2 million).

A key reason retail investors find limited options in the green investment space is due to financial institutions’ perception of low demand.

However, organisations like Mindful Money are actively working to bring impact investing into the mainstream in NZ. An effective way to contribute to this change is by communicating your interest in these types of investments to banks and fund managers. Letting these financial institutions know there is a growing demand for sustainable investment options can help broaden the availability of such choices for all of us.

Listed companies: Investing in the growth of green companies

In NZ and international stock markets, there are numerous listed companies making significant strides in sustainability. These companies are typically larger scale and well-established, offering an added layer of transparency and regulatory oversight that can provide reassurance to investors. By choosing to invest in these companies, you're not only placing your funds in companies poised for future growth but also actively supporting their commitment to sustainable practices.

Examples of listed green companies are renewable energy companies like Meridian, Mercury and NZ Windfarms; wine producers like Yealands and Villa Maria; KMD Brands (Kathmandu) and Comvita.

How to invest in listed companies?

Online Platforms: Hatch, Sharesies, Tiger Brokers and Stake make it easy to purchase shares online if you know the company you’d like to invest in.

Managed Funds: Investment funds like Harbour’s Sustainable Impact Fund, Devon Global Impact Bond Fund, ASB’s Positive Impact Fund, TAHITO Te Tai o Rehua Fund, Kernel’s Clean Energy Fund or their EV fund can offer exposure to listed companies that are green as part of their asset mix.

KiwiSaver Funds: Even mainstream KiwiSaver funds can invest in green companies, such as Pathfinder, Simplicity and Generate KiwiSaver. Typically, they aim to ensure the returns in green companies are as good as their other investments.

Information on the portfolios and performance of managed funds and KiwiSaver funds is available on Mindful Money’s website.

Navigating the risks

Investing in green initiatives, especially startups and innovative projects, may involve a higher degree of risk. It’s crucial to research thoroughly and consider diversifying your investments to spread these risks.

As the green investment space grows, so does greenwashing, where companies claim more environmental impact than they deliver. It’s essential to research these claims carefully to ensure your investments truly contribute to a greener future. Mindful Money is a great place to start for KiwiSaver and managed funds, while their website currently does not report the positive companies held by a fund, it will show you the exposure in a fund to companies causing harm.

Investing in green initiatives in NZ is more than a financial strategy; it’s a commitment to a sustainable future. By aligning your investments with companies that are actively contributing to the green economy, you contribute to the planet’s health and position yourself to benefit from the growing environmental consciousness in the business sector.