Sustainable investments
Sustainable investments
Podcast
7.7.2022
The combination of private equity (PE) or venture capital (VC) with the idea of impact is still a relative novelty in Germany. So what motivates investors to invest part of their funds from these asset classes in impact projects?
Five of the ten greatest risks to humanity are of an ecological nature, as identified by the World Economic Forum 2022. It is therefore not only leading representatives from business and politics who are now paying the utmost attention to the climate issue. Regulators and consumers are also rethinking. According to the energy and climate data provider Net Zero Tracker, 76% of consumers are willing to pay more for sustainable food. In addition, governments around the world, whose gross domestic product (GDP) accounts for 90% of global GDP and whose greenhouse gas emissions account for 88% of global greenhouse gas emissions, have committed to a national "Net Zero" commitment.
It is therefore not surprising that almost 90% of the investment offering is dedicated to developing solutions to the challenges of climate change.
The urgency of developing new climate technologies is therefore beyond question. In Germany alone, the Federation of German Industries estimates in its study "Climate Paths for Germany" that domestic industry needs to invest between 1.5 and 2.3 trillion euros. Countries such as China and parts of the USA have also introduced CO2 taxes, which will continue to increase over time.
This in turn creates an enormous demand for innovations that want to be financed by the private sector. The result is climate-focused PE and VC investment opportunities that - carefully selected - serve the great transformation and are high-yielding at the same time.
The investment areas reflect the climate challenges:
It quickly becomes clear that this is less about the familiar infrastructure projects in the field of renewable energies, such as wind turbine construction or solar installations, which are usually associated with climate solutions. Rather, it addresses a transformation in all areas and activities of our daily lives towards less resource consumption and the avoidance of greenhouse gas emissions.
If we take a closer look at the areas of food production, agriculture and the food industry, for example, the following questions are answered anew: What foods are needed? How much water, pesticides and greenhouse gas emissions are used to produce it? What transportation routes are necessary to get to the consumer? How is the food preserved? How are they packaged? And finally, how much food is thrown away at the end of the day due to overproduction, incorrect distribution and insufficient shelf life and how this can be avoided.
It is no secret that there have been considerable missteps in agriculture in recent years and thus undesirable developments that require a reorientation in food and agriculture.
Alternative cultivation methods such as vertical farming, replacing chemical pesticides with biological ones, the use of electric tractors, biological processes to extend the shelf life of food; these are just a few examples of food-related solutions. Some fund managers specialize in precisely such fields of innovation in food and agriculture. They invest in companies that are breaking new ground in these areas and developing corresponding technologies and processes.
My personal conclusion is that private equity and venture capital are the perfect financing instruments for providing capital for the major challenges that need to be tackled for our lives on this planet. What a fantastic idea to be able to support this transformation through your own investment and at the same time achieve private equity or venture capital returns!
Part 2 of this blog series can be found here.
Sustainable investments
7.7.2022
Barbara Wokurka
Impact investing is not just a matter of the heart. If you want to invest your wealth in this type of investment, you have to ask yourself a few fundamental questions: Do I want to achieve an ecological and/or social impact with my investment? Should the impact take place on a global or regional level? What return do I expect from the impact investment?
The combination of private equity (PE) or venture capital (VC) with the idea of impact is still a relative novelty in Germany. So what motivates investors to invest part of their funds from these asset classes in impact projects?
Five of the ten greatest risks to humanity are of an ecological nature, as identified by the World Economic Forum 2022. It is therefore not only leading representatives from business and politics who are now paying the utmost attention to the climate issue. Regulators and consumers are also rethinking. According to the energy and climate data provider Net Zero Tracker, 76% of consumers are willing to pay more for sustainable food. In addition, governments around the world, whose gross domestic product (GDP) accounts for 90% of global GDP and whose greenhouse gas emissions account for 88% of global greenhouse gas emissions, have committed to a national "Net Zero" commitment.
It is therefore not surprising that almost 90% of the investment offering is dedicated to developing solutions to the challenges of climate change.
The urgency of developing new climate technologies is therefore beyond question. In Germany alone, the Federation of German Industries estimates in its study "Climate Paths for Germany" that domestic industry needs to invest between 1.5 and 2.3 trillion euros. Countries such as China and parts of the USA have also introduced CO2 taxes, which will continue to increase over time.
This in turn creates an enormous demand for innovations that want to be financed by the private sector. The result is climate-focused PE and VC investment opportunities that - carefully selected - serve the great transformation and are high-yielding at the same time.
The investment areas reflect the climate challenges:
It quickly becomes clear that this is less about the familiar infrastructure projects in the field of renewable energies, such as wind turbine construction or solar installations, which are usually associated with climate solutions. Rather, it addresses a transformation in all areas and activities of our daily lives towards less resource consumption and the avoidance of greenhouse gas emissions.
If we take a closer look at the areas of food production, agriculture and the food industry, for example, the following questions are answered anew: What foods are needed? How much water, pesticides and greenhouse gas emissions are used to produce it? What transportation routes are necessary to get to the consumer? How is the food preserved? How are they packaged? And finally, how much food is thrown away at the end of the day due to overproduction, incorrect distribution and insufficient shelf life and how this can be avoided.
It is no secret that there have been considerable missteps in agriculture in recent years and thus undesirable developments that require a reorientation in food and agriculture.
Alternative cultivation methods such as vertical farming, replacing chemical pesticides with biological ones, the use of electric tractors, biological processes to extend the shelf life of food; these are just a few examples of food-related solutions. Some fund managers specialize in precisely such fields of innovation in food and agriculture. They invest in companies that are breaking new ground in these areas and developing corresponding technologies and processes.
My personal conclusion is that private equity and venture capital are the perfect financing instruments for providing capital for the major challenges that need to be tackled for our lives on this planet. What a fantastic idea to be able to support this transformation through your own investment and at the same time achieve private equity or venture capital returns!
Part 2 of this blog series can be found here.
About the author
Barbara Wokurka
Barbara Wokurka is responsible for impact investing at FINVIA. She can look back on 30 years of professional experience working for financial service providers and in the real economy in the areas of corporate finance and asset management.
She laid the foundations of her career at Deutsche Bank in Frankfurt and London in the Corporate Finance division before joining Porsche AG in 1999 to set up and head up asset management for the Group. In 2007, she moved to Quoniam Asset Management GmbH, where she initially looked after German Tier 1 clients and then took over sales management for the international market as a partner, including the establishment and management of the Quoniam branch in London.
