European Green Investment market tipped to exceed €500 billion

Analysts say invest in green - but not all at once. Photo:pfala

As the first ever National Ethical Investment Week (NEIW) gets underway, the European Green Investment market is predicted to exceed €500 billion.

An increasing awareness and support for the environment, along with a choice of financial products to reflect that support, is the reason for the growth according to Frost and Sullivan. The investment analysts reveal that the sector has increased by about 20 per cent between 2006 (€150bn) and 2007 (€180.40bn), and is expected to grow at a rate of around 18 per cent between 2007 and 2014, to reach €572.9 billion by 2014, with huge investments being made in green product and technology development.

‘Global warming and world climate change are fuelling the growth of the green investments market, which has tremendous profit potential and is expected to mature in the years to come,’ say Kirti Timmanagoudar and Kavitha Chakravarthy, Frost and Sullivan’s financial analysts. ‘Regulatory support and public demand for green investments has led to the creation of an array of green investment alternatives such as green mutual funds, green hedge funds and green exchange traded funds.’

Frost and Sullivan expect governments to build on subsidies and tax reliefs that are currently offered to encourage companies to go green, and in the future lay down strict environmental standards, to be met by all companies. ‘A regulation is expected soon wherein pension funds have to invest at least a proportion of their assets in social responsibility investments,’ says Chakravarthy. ‘This is expected to further propel the growth of the green investments market.’

While an expanding green investment market sounds promising, the analysts warn of the dangers of the green market being flooded in a rush to ride the ‘green wave’. ‘Too much of money flowing into the green investment market can artificially inflate the prices of the green stocks,’ explains Timmanagoudar. ‘This could result in a green bubble burst, which can further lead to huge market losses and capital erosion.’

The analysts predict that European green investments market will yield above average returns in the medium term, and social responsibility investment funds will grow above market rates in the near future. However it advises green investors to invest systematically and avoid putting all their money in the market at once. Frost and Sullivan advise always carrying out strong research, being careful not to be swept away by the ‘green tag’ used by marketers.

NEIW can point you in the right direction for advice on how to make sure your money’s growing in the right direction.