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Green Funds
Green investing funds
Key takeaways:
- provides exposure to the green transition
- promotes environmental or social characteristics
- Europe is at the forefront of green investing.
For a sustainable world
Watch your investments grow – without feeling any guilt towards future generations. By investing in green investment funds, you contribute to accelerating the green transition, which is still in its infancy. In this article, AuAg Funds explains what a green investment fund is and why green investing is important.
Why invest in green investment funds?
There are several advantages to investing in green funds, which are listed below.
Make an impact. By investing in a green fund, you contribute to the capital supply for companies actively participating in the green transition or whose operations contribute to achieving sustainability goals.
Invest with a clear conscience. Green investing provides synergies and makes it possible to create better conditions both for your fellow man and for future generations.
Good return potential. Green investing funds invest in companies that drive the transition towards a green world. Investing in these funds exposes you to a global megatrend that will continue for many years to come. Being exposed to such a trend can generate good returns.
What is a green fund?
A green fund is a securities fund or other investment instrument that only invests in companies that contribute to positive change related to social and environmental factors. A green investing fund can invest in different sectors, such as renewable energy, energy efficiency, sustainable transportation, and waste management. It is worth noting that a green fund does not have to invest in green technology. Read about the differences between green funds and green technology funds.
There are different types of green funds; more information on fund type and classification can be found further down the page.
Europe is leading the way in sustainable investing
Green funds have become increasingly more popular in recent years, and at the EU level, capital flows are actively directed towards sustainable funds through the new disclosure regulation. According to Morningstar's Global Sustainable Fund Flows Report for the fourth quarter of 2022, Europe continues to lead the way in global sustainable investing. Europe captured the largest share of inflows and represented the largest share, 83 %, of global assets in sustainable funds at the end of 2022.
Is sustainability profitable?
Sustainability has positive effects on the environment and humanity, and can also increase well-being and provide good returns. Investing in green funds, companies developing green technology and similar can gain economic muscle to develop and produce technology that enables a sustainable transition. Green technology can potentially improve living conditions for people globally through better waste management, cleaner air, and a safer energy supply.
Knowing that your investment is doing good for the environment and society can also lead to a lighter heart, a sense of control, and increased hope for the future. Green investing does not have to mean sacrificing returns. In fact, when Morningstar analyzed how nearly 5,000 funds performed over ten years in 2020, it turned out that most green investing funds outperformed traditional funds. A study from Harvard also shows that companies that voluntarily adopt sustainability principles have better stock market returns than companies that do not.
Historical returns do not guarantee future returns, but we at AuAg Funds (along with many others) believe that green investing has a bright future. More people than ever chose to invest in green investment funds in 2022, and if you believe in the megatrend "The Transformation to a Green World," it is likely that this long-term trend will continue in the coming years and decades.
AuAg Funds – part of the solution
AuAg Funds was founded in 2019. Since then, we have launched funds that contribute to a more sustainable world by green investing in the elements required to achieve the green transition and carefully selected companies that are part of the solution. By investing in "best-in-class" companies, excluding those that lag behind, and rewarding companies that are working towards sustainability, we can create an even greater net effect for the world.
Our greenest fund yet
Our AuAg Precious Core fund has green energy as a sub-strategy, but it is not a fund purely for green investing. Instead, the fund invests in companies involved in renewable energy production and green technology, but is much more than a typical green technology fund. The fund challenges the traditional 60/40 portfolio and replaces the equity portion (60 %) with companies involved in green power, energy, efficiency, and metals (such as copper and lithium).
The traditional interest element (40 %) is instead invested in physical precious metals, focusing on gold. Gold has a low correlation with the broad stock market and thus serves as an effective hedge and diversification of the portfolio.
For many funds, not just green funds, 2022 was a year of red numbers – except for AuAg Precious Core. The unique combination of green technology and gold proved to be successful, and the fund was one of ten funds in Sweden with the highest return in 2022, according to Morningstar (the article is in Swedish).
Why invest in sustainable funds with AuAg Funds?
- Our funds are classified under Article 8 of the Sustainable Finance Disclosure Regulation (SFDR), which means they promote environmental or social characteristics. Learn more about our sustainability work.
- Our funds are composed in such a way as to provide exposure to both the green transition and a well-diversified portfolio. Through us, you can invest in mining companies that extract raw materials such as silver, gold, and other elements.
- Our funds for green investing are part of the solution. The global climate goals cannot be achieved without mining companies, as they are crucial for extracting the elements needed for the green transition. Moreover, mining companies account for a significant portion of the world's carbon emissions. By only investing in mining companies with the highest ESG rating, i.e. the most sustainable ones, we can create an even greater net effect for the world.
Be part of the journey
More than 100,000 investors across Europe have invested in the AuAg funds.
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Different types of green funds
The SFDR has been developed on the EU level to clarify what a sustainable fund is. The SFDR requires certain types of actors on the financial market to publish sustainability information on their website and provide information on sustainability to help investors better understand how sustainable an investment is.
The overall purpose of the SFDR is to clarify an investment’s sustainability level. It also aims to combat greenwashing and direct capital flows toward more sustainable investments. The directive establishes some future boundaries that the financial industry will need to consider. A fund classification has also been developed where green funds have been defined.
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Fund classification
The SFDR requires funds to be classified as either Article 6, 8, or 9. Below is a brief description of the different classifications.
Article 6 – Integrates sustainability risks
The fund chooses between providing information on how sustainability risks are integrated and expected to affect the fund's return or not. If the fund chooses not to provide information, it must explain why. This category is also referred to as "gray".
Article 8 – Promotes environmental or social characteristics
When a fund promotes environmental or social characteristics, the disclosures to be made in the information document must contain information on how the environmental or social characteristics are achieved. For example, if an index is selected as a reference value, information on this index's compatibility with these characteristics must be provided, and the method used to calculate the index must be specified. These funds are usually called “light green” funds and are a broad category.
Article 9 – Sustainable investments are the goal
When it comes to funds with sustainable investment as their goal, additional requirements are imposed – including the choice of index among others. What should be interpreted as “having sustainable investment as the goal” and what thresholds apply is challenging to determine with the information available today. It is likely to include a requirement that a minimum portion of the fund meets the regulations under the EU Taxonomy or has other measurable impact strategies. This category of green funds is sometimes called "dark green".
