The Need for Green Investing and Sustainability Despite Political Risks

To be in sync with the world is to understand. And to understand is to align our processes with nature’s needs despite our constant evolution in technology.

Our responsibility as humans is to ensure that all our operations are symbiotic with what truly makes us–nature.

Time and time again, Mother Nature has vividly demonstrated that it is merciless.

Subsequent evidence of global warming is all too apparent with cases of rising sea levels, changing climatic patterns, flooding, and global warming.

Accordingly, to be attuned to the needs of nature, the investment world has realized the need to nip the destructive bud all while it is too early.

By destroying the stem of the destructive flower, there are more opportunities for investors to profit because of the sustainability that comes with it.

For this reason, more investors are gravitating towards eco investing or green investment opportunities, aware that they will, in a way or two, directly contribute to making the world a better place to be.

What are Green Investments?

Green investments are those which focus on social and environmental responsibility.

This investment style directly supports and promotes the uninterrupted flow of funds towards developing and implementing sustainable business models, policies, investments, trades, and more that help conserve the environment.

Companies that receive them have committed to preserve the environment by either implementing policies helping reduce environmental pollution or slash on the use of fossil fuels, and more.

They could achieve this by using alternative and sustainable green energy sources, participating in eco-friendly waste management practices, or forming cleaning projects.

The Paris Agreement Accord

A big part of green investing is to meet the requirements as set out by the Paris Agreement Accord under the United Nations Framework Convention on Climate Change (UNFCCC) signed in December 2015 by all 196 member states.

Most G7 countries, including China and the United States, form part of this covenant.

The overall objective, as stipulated by its dictates, is to, most importantly, cap the expansion of the global average temperature below two degrees Celsius and above the pre-industrial level by the end of this century.

To achieve this, members of the UNFCCC agreed to reduce the emission of greenhouse gases which was pinned as the primary contributor to global warming. Greenhouses are mainly released by industrial processes refining extracted earth processes.

As such, members saw fit to gradually improve the energy efficiency of existing technologies, aim to reduce carbon dioxide emission by 20 percent, and double down on renewable energy investment by increasing fund allocation—that is green investment—by 20 percent.

Overall, signatories of the Paris Agreement have an ambitious target of putting in place efforts that would cumulatively prevent the world’s temperature from rising above the 1.5 degree Celsius average.

Political Risks a Threat to Decarbonize and invest in Green Companies

Despite efforts, threats are slowing down the smooth implementation of the Paris Agreement, even throttling green investment opportunities.

One significant headwind being political risks, including changes in governments.

Usually, a change in leaders could mean adopting a conflicting legal system, often reassessing previous binding agreements previous regimes committed them to.

For instance, Donald Trump pulled the United States out of the Paris Agreement, claiming that de-carbonization efforts were not in their best interests. Under the Democratic administration of Joe Biden, the United States has joined the accord, greatly helping advance this novel effort.

Even with China’s ambition to gradually decarbonize by 2060, their constant clashing with Canberra on Iron Ore threatens to unwind solid progress made in the past five years.

While China’s decision not to buy Australia’s Iron Ore has seen global prices of the commodity rise, experts are warning that Australia’s failure to invest in companies going green could see capital flow away to other countries.

John McMurdo, the CEO of Australian Ethical, said the country could be a destination for green investments. However, for this to happen, Australia’s leaders must first grasp the full impact of climate change.


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