Green investment is starting to attract young people as a concrete manifestation of environmental concern.
Green investment is not a new term in the investment world. However, this green investment has indeed started to be in great demand in the past few years, especially among young people.
In the Third Pre-Y20 Summit which discussed the important role of youth in creating a sustainable and livable planet, the green investment movement could be a strategic step to support environmental sustainability.
In simple terms, green investment refers to all investment products such as stocks, bonds or mutual funds issued by companies that carry out environmentally friendly business practices.
By purchasing green investment products, you are assisting in the development of a business ecosystem that is ecologically conscious and in tune with the natural world.
This is because green investment only focuses on companies that are committed to conserving natural resources, reducing pollution, or other environmentally conscious businesses.
So, how is the practice of green investment in Indonesia?
Understanding about Green Investment
News from Educba, the term “green investment” refers to investment activities that are focused on projects or companies that are committed to the preservation of natural resources.
Some of the initiatives for the conservation of natural resources include the use of alternative energy, implementing projects related to clean air and water, or other good activities.
Green investment is one type of socially responsible investment. Funds for green investments can be obtained from corporations, private equity firms, or individuals.
Usually these funds are collected in the form of securities, mutual funds (MFs), electronic traded funds (ETF), and bonds.
Green investment is often grouped under the Socially Responsible Investing (SRI) or Environmental, Social, and Governance (ESG) category. Green investments focus on companies or projects that are committed to natural resource conservation, pollution reduction or other environmentally conscious business practices.
For example, companies that produce alternative energy, recycled products, solar panels, or low emission products.
Types of Green Investment
Summarised from Investopedia, there are several types of green investments that you can have. The following is explanations of each type:
1. Green Equities
The first type of green investment is green equities or green equity. This term refers to stock instruments as investment products.
That is, you can have green investments in the form of shares in various environmentally friendly companies.
Currently, there are many companies or startups that focus on running an environmentally friendly business. For example, Elon Musk’s Tesla company focuses on producing emission-free electric vehicles.
2. Green Bonds
Green bonds are also known as green bonds. Just like the definition of bonds in general, the only difference is the company issuing the bonds.
In green investing, green bonds mean fixed-income securities that represent loans to assist banks, corporations, and government agencies in financing projects with a positive impact on the environment.
3. Green Funds
Green funds or green mutual funds provide wider exposure to investors. Green mutual funds allow investors to fund green projects and companies consisting of several stocks or bonds.
Just like mutual funds in general, the difference lies in the company or project that will be funded through this mutual fund. Only eco-friendly companies are eligible for green mutual fund
Is Green Investment Profitable?
Green investment is the same as investment in general. That is, profitable or not, it all depends on the analysis and strategy you apply.
For the record, there are several important points that you need to know about green investment opportunities, namely:
1. Green Power
The world is currently facing major climate change. Under these conditions, sources of electricity for homes and industries that are environmentally friendly will be increasingly sought after. Thus, many investors will be interested in green investment.
2. Water Stock
Climate change in recent years has caused many people to worry about the difficulty of obtaining clean water. As such, there has been substantial investment made for the sustainable collection, purification and distribution of water.
3. Wind Power
Wind is one of the fastest growing sources of renewable energy having grown 75 times over the last twenty years. Recently, many investors are interested in investing in companies that produce wind turbines.
4. Solar Energy
In recent years, many investors have focused on companies that manufacture solar panels and other related products.
5. Pollution Control
The only way to control pollution is to reduce pollution. The government is trying to reduce greenhouse gas emissions, reduce vehicle emissions, etc.
To implement such large-scale measures, the government needs support in the form of investment.
6. Waste Reduction
With lifestyle changes, the need for waste reduction is increasing. In this case, it is important for everyone to reduce the accumulation of waste and recycle used goods.
Thus, there is a business that is growing and involves recycling goods so that it requires a large investment.
Implementation of Green Investment in Indonesia
One of the legal bases for implementing green investment in Indonesia is regulated in Law (UU) Number 25 of 2007 concerning Investment.
Article 3 Paragraph (1) states that investment is carried out based on environmental principles. In the same law, Article 16 letter d states that every investor is responsible for preserving the environment.
The government also supports green investment by making various strategic projects that support sustainable development.
The Indonesian National Development Planning Agency (Bappenas), for example, has developed four main programs related to green investment. The four programs are energy, sustainable landscapes, Special Economic Zones (KEK), and preparation for the Green Climate Fund (GCF).
The importance of green investment in Indonesia is supported by the fact that many people are aware of the bad effects of climate change and most of them are very interested in solving these environmental problems.
In other words, green investment can be a way to alleviate human-made problems for the environment.
That is an explanation of the application of green investment as a concrete manifestation of youth in maintaining environmental sustainability and a better world.
