Going green is finally paying off, as a study has shown that green funds are significantly outperforming “black funds”.
Green funds invest only in environmentally friendly companies. But it seems ethical preoccupations needn’t be the only reason for choosing them.
The University of Edinburgh Business School analysed 1,400 funds and found that over the past two years, green funds outperformed “black funds” - which invest in fossil fuels - by over 14 per cent.
Green funds also delivered the same returns as conventional funds over the period. Previously, green funds have tended to under-perform against conventional funds.
Dr Gbenga Ibikunle, who led the study, said it showed that green investments were finally “coming of age”:
Our research shows these environmentally-friendly investments – which were once the preserve of ethical stockholders – are now delivering better returns than their peers, and attracting interest from a much wider community of investors.
However, it’s not all smooth sailing, as the study also found indications that green stocks, often being small and volatile, might have a more limited ultimate growth potential than conventional funds. And whether the trend of the past two years will continue does, of course, remain to be seen:
But with renewables now a firm fixture in most western economies’ energy mixes, the prospects for this asset class look promising.