In 2016, the combined value of global assets managed with a focus on Environmental, Social, and Governance (ESG) considerations amounted to $22.8 trillion. Fast forward to today, that impressive number has skyrocketed to a staggering $40 trillion. Over the past decade, the impact investment sector has witnessed a remarkable tenfold increase, reflecting the growing interest among investors in evaluating ESG risks when considering investment opportunities.
As investors seek meaningful ways to make a positive impact through their financial choices, real assets have emerged as a compelling option. These tangible investments have demonstrated their strength in creating a difference and aligning with the values of socially and environmentally conscious investors.
Real Estate & Infrastructure
The real estate industry has a massive impact on climate change. In fact, buildings and construction are responsible for a staggering 39% of all global carbon emissions every year. Additionally, a mind-boggling 30 billion tons of concrete are used annually, leaving a huge environmental footprint.
But there’s hope! The industry is adapting to the demand for eco-friendly properties from office tenants, developers, and investors. An impressive 84% of premium office buildings now boast environmental sustainability certification. Plus, the commercial real estate sector is set to benefit from the race to install electric vehicle charging stations.
Now, you might wonder if these environmentally-conscious properties come at a high cost. While it’s true that they often require more significant initial investments, they pay off in the long run. These green properties generate higher rental income and greater net cash flow over time. As a bonus, they historically provided investors with protection against inflation.
Farmland
The agriculture real estate sector is also witnessing a positive shift towards sustainability. To tackle the challenges posed by a changing climate and meet the rising demand for food, many farms are embracing sustainable practices.
Over the past decade, the adoption of no-till farming has increased by an astounding 93% worldwide. Furthermore, a recent survey showed that 81% of farms now use cover crops to manage soil erosion, improve soil quality, and retain water. Major manufacturers and food retailers are committing to sourcing their products from farms that practice regenerative agriculture. This approach can potentially capture up to 30% of annual greenhouse gases under ideal conditions. On the financial side, organic agriculture has been found to be 22% to 35% more profitable than conventional methods.
Investing in sustainable farmland has proven to be a wise choice. In the last 30 years, the farmland industry has not experienced any annual losses. As an example, my own company has seen an average annual return of around 11% from these investments. Sustainable agriculture, in particular, offers longer-lasting benefits compared to other farming methods. It encourages efficient operations through natural soil nutrient replenishment, disease prevention, biodiversity growth, and water conservation. Not to mention, regenerative farming systems have shown an impressive 78% higher profit compared to traditional production methods.
Sustainable Energy
Did you know that a staggering 46% of the greenhouse gas emissions caused by humans since 1750 are linked to coal production and use? But hold on, the energy industry is experiencing a revolutionary transformation, opening up a world of sustainable and innovative opportunities!
Investments in low-carbon and carbon-neutral energy sources have skyrocketed by a staggering 27% since 2020, continuing their impressive upward trend into the year 2023. Brace yourself for an awe-inspiring future as global solar farms are expected to witness a remarkable 20% annual increase until 2027, alongside a record-breaking number of wind turbine installations set for 2022. The best part? The payback period for wind turbines can be as short as six to 17 months, and solar farm companies are boasting an average annual return on investment of around 15%! Between 2010 and 2020, renewable energy delivered a mind-blowing 7 times higher returns compared to fossil fuel investments!
Now, get ready to be electrified by the automobile industry! The number of electric vehicles on the road has skyrocketed by a whopping 100 times in the past decade. Global electric vehicle market, which reached an astonishing valuation of $287 billion in 2021, is forecasted to experience a jaw-dropping annual growth rate of 24.3% upto to 2028. This remarkable surge is fueled, in part, by upcoming legislation that offers incentives to encourage greater adoption of electric vehicles in 2023.
Timberland
Brace yourself for a wooden skyscraper in Chicago, reaching a jaw-dropping 80 stories! Can you believe it? Wood pellets have been discovered to emit a staggering 91% fewer greenhouse gas emissions than coal. And that’s not all—wood byproducts have paved the way for a premium bioplastic, a fantastic alternative to traditional plastic. Now, get ready for a breathtaking investment opportunity! Timberland has historically shown almost no correlation with equity markets. With average returns of 6.7% from 1970 to 2020 (and a staggering 9.17% in 2021), timberland proves to be a treasure trove of returns. It’s intriguing how timberland has a low correlation of 12% with the S&P 500, but an astonishingly high correlation of 82.3% with inflation!
Real Assets
Achieving a net-zero carbon portfolio is within reach by dedicating just 20% of your holdings to real assets. But wait, there’s more! These remarkable assets can even outshine traditional portfolios, packed with stocks and bonds, by delivering higher returns and reducing risk. Yes, you read that right!
Are you eager to dive into eco-friendly investments without compromising on financial gains? Look no further than real assets - the mighty class that could reshape the future for good. Not only do they promise an Earth-friendly approach, but they also open doors to incredible financial opportunities.
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