Here’s Why You Should Be Eco-Conscious As An Investor

As part of the support towards the United Nations’ Sustainable Development Goals (SDG), Malaysia is committed to achieving a sustainable future through the 2030 Agenda for Sustainable Development.

With companies from key sectors such as oil and gas planning to achieve Net Zero Carbon Emission by 2050 and the Malaysia Investment Development (MIDA) approved green technology projects valued at RM3.66 billion, the interest in sustainable and renewable energy investments is increasing.

As such, you might wonder whether it’s time for you as an investor to consider jumping into sustainable and renewable energy investing.

To help you with that, we’ll take a look at what it is all about, its potential benefits and risks for investors, and why Asia-Pacific may be the next wave of investing in the renewables sector.

Renewables: What is it?

Investing in the renewables sector means investments in businesses and industries involved in the renewable energy sector. This means energy from natural sources that will not deplete existing fuel reserves and can be replaced faster than it is consumed.

It is often associated with socially responsible investing (SRI), with a focus on investing in companies and projects that aim to minimise environmental damage or promote sustainability efforts.

Common examples of renewable energy/green investments are:

• ETFs or mutual funds that are environmentally friendly
• Green bonds
• Stocks from companies focus on sustainability and green practices

It might sometimes be referred to as sustainable or eco-investing, but generally, renewable energy investing tends to consider environmental, social and governance (ESG) factors along with seeking potential attractive financial returns.

While ESG and renewable energy investing might appear the same, there are slight differences. ESG investors tend to focus on overall sustainability through social and governance issues, in addition to environmental causes, while renewable energy investors will solely focus on investments that helps benefit the environment, develop renewable energy, and promote greener outcomes.

Despite the similarities and differences between ESG/SRI investing and renewable energy investing, the goal that they both share is to help make a better future for everyone.

Why invest in the renewables sector?

There are always risks involved in any form of investment. However, there are potential benefits that are specific to the renewables sector that should be considered if you want to diversify your investment portfolio.

Doing the right thing. For starters, you can feel good about your investment portfolio as your funds go into companies that are working to help make the world a better place.

Get comparable returns while mitigating risk. Investing in renewable energy, which is part of sustainable investing portfolios, has been shown to offer lower market risks than traditional investments, while still offering comparable returns.

No investment is without risk and the same goes with renewable energy investing. You can still end up with losses depending on how the market performs.

Additionally, most companies that lead in environmentally friendly businesses might be startups and growth companies, which may be less stable in terms of stock performance compared to established companies with fewer sustainable goals.

Of course, when it comes to renewable energy investing, it’s more about aligning your eco-conscious values with your investment portfolio goals.

Why Asia-Pacific may be the next wave of renewable energy investing

Asia-Pacific is set to be the key destination for investors in terms of renewable energy development and with post-pandemic recovery programs underway, there is potential for market penetration of renewables technology and funds within the region.

There are indications that the Asia Pacific region has started its transition towards a greener future:

• An expected increase in renewable energy investments up to USD 1.3 trillion by 2030
• Over 40% of the world’s wind turbines are manufactured in Asia
• Over 50% of the global market share for electric vehicle batteries shared between Korean and Chinese manufacturers
• Over 80% of the world’s solar panels are produced by companies located in China

As such, finding the right place to start your renewable energy investing journey can be a great way to position your investment for growth and be part of a sustainable future.

Riding the renewables wave with Principal

Principal Malaysia, in part, has already positioned your investment interests for future growth by offering the Principal Asia-Pacific Renewable Fund for investors who are keen to diversify their portfolio with renewable energy funds.

The fund comes with four investment options to help you be eco-conscious!

1. Principal Asia Pacific Renewables Fund (Class AUD-Hedged)
2. Principal Asia Pacific Renewables Fund (Class MYR-Hedged)
3. Principal Asia Pacific Renewables Fund (Class SGD-Hedged)
4. Principal Asia Pacific Renewables Fund (Class USD)

That’s on top of their commitment to responsible investing and ESG integration towards their company, employees, and business partners. Principal’s parent company, Principal Financial Group, is also ensuring that they make a positive impact on the environment by working towards a 40% reduction in greenhouse gas emissions by 2035 and net-zero carbon emissions by 2050.

Disclaimer: We have based this document on information obtained from sources we believe to be reliable, but we do not make any representation or warranty nor accept any responsibility or liability as to its accuracy, completeness or correctness. It contains general information only on investment matters and should not be considered as a comprehensive statement on any matter and should not be relied upon as such.

Expressions of opinion contained herein are those of Principal Asset Management Berhad only and are subject to change without notice. This article is not intended to be, nor should it be relied upon in any way as a forecast or guarantee of future events or investment advice regarding a particular investment or the markets in general. The data presented is for information purposes only and is not a recommendation to buy or sell any securities or adopt any investment strategy. This material is not intended to be relied upon as a forecast, research, or investment advice regarding a particular investment or the markets in general, nor is it intended to predict or depict performance of any investment.

The information contained in this document does not take into account any investor’s investment objectives, particular needs or financial situation. Investors should consider whether an investment fits their investment objectives, particular needs and financial situation before making any investment decision. Past performance is not reflective of its future performance. Investing involves risk and cost. You should understand the risks involved, compare and consider the fees, charges and costs involved, make your own risk assessment and seek professional advice, where necessary.

Environmental, social and governance responsible investing (ESG) is qualitative and subjective by nature, and there is no guarantee that the criteria utilized, or judgment exercised, will reflect the beliefs or values of any one particular investor. Information regarding responsible practices is obtained through voluntary or third-party reporting, which may or may not be accurate or complete, and such information is used to evaluate a company’s commitment to, or implementation of, responsible practices. Socially responsible norms differ by region. ESG, while a component of our investment analysis, is only one part of the overall assessment in our decision-making activities. ESG criteria may present additional advantages or risks and does not protect against market risks or volatility. You should not make any investment assumptions based solely on the information contained herein. There is no assurance that the socially responsible investing strategy and techniques employed will be successful.

The Securities Commission Malaysia does not review advertisements produced by Principal.