Invest in a Green Technology Fund
Invest in a green technology fund
Key takeaways about green technology funds:
Gives exposure to the green transition
Growing demand offers potential for significant returns
Allows alignment of financial goals with environmental values
Regulatory support can boost green sectors.
Bonds have long been considered a safe haven when the stock market goes down, but what happens when both stocks and bonds go down simultaneously? In today's volatile market, many investors are looking for a fund that is designed to perform regardless of the investment climate. Our green investment fund, AuAg Precious Green, invests in green technology and physical precious metals. The fund is an innovative remake of the classic 60/40 portfolio and follows trends in monetary inflation and the transformation to a green world.
What is a green technology fund?
A green technology fund invests in companies that are pivotal to the transition to a greener world. For instance, these might be companies developing products and services that contribute to the production of environmentally friendly energy, reduced energy consumption, decreased emissions, or energy recycling.
What is the difference between green funds and green technology funds?
A common misconception is that a green technology fund is also a green fund, otherwise known as a sustainable fund. Sustainable funds and those focusing on green technology might overlap, but they don't necessarily do so. Green investment funds contribute to a sustainable future by selecting companies that either operate in an environmentally friendly manner or drive green technological innovation.
Regarding the distinction between a "green fund" and a "green technology fund", the former invests in sustainable companies across multiple sectors, while the latter specifically focuses on technology companies championing green innovation. Green technology funds might also have higher volatility due to their tech-focus, whereas green funds typically offer broader diversification across various sectors.
Why invest in green technology investment funds?
Humanity is facing an important task, to implement a transition to a sustainable world. To achieve this, we need to develop products in the area of green technology. These products make transitioning to a sustainable world possible, such as solar cells, batteries, and fuel cells.
Investing in green technology is required to accelerate this development, which rewards the best companies and products in the field. By, for example, making green tech investments and saving money in sustainable investment funds, the investor contributes to the acceleration toward a greener world.
Investing in a green technology fund is not only good for the environment, it also has all the potential to become a profitable investment. The development of green technology has gone from modest levels to steadily increasing.
How well do green technology funds perform?
It is difficult to predict how a fund will perform since there are so many factors to consider. Highly leveraged companies and companies that do not make money generally perform worse during high inflation because interest rates rise.
A green technology fund is usually a stock fund and therefore follows the broader stock market. During high inflation, it is generally better to have stocks than fiat currency (a government-issued currency not backed by a physical commodity but rather by the issuing government) because over time, the stock market tends to go up while the purchasing power of fiat currencies always goes towards its inherent value, zero.
During low inflation, funds focusing on green technology tend to perform better because interest rates are usually low. Suppose you want to diversify your portfolio towards new technology and gain exposure to the future of electrification. In that case, you can invest in a green technology fund regardless of whether there is low or high inflation. Investing in green technology also gives an opportunity to invest in companies that are making a positive impact in terms of sustainability and environment.
Our green technology fund
AuAg Funds creates investment solutions focusing on precious metals and green technology-based resources. AuAg Precious Green is one of our four funds focusing on green technology. AuAg Precious Green is a remake of the classic 60/40 portfolio where green tech companies replace the global stock portion and the bonds are replaced by physically backed precious metals (primarily gold).
In other words, it is a green technology fund that both provides exposure to the green transition and is diversified with its allocation towards gold. This contributes to a fund focusing on green tech investments that perform regardless of market climate and thus have the potential to generate a high risk-adjusted return.
The fund provides exposure to green technology companies in four different areas:
Production of clean energy - for example, companies that produce solar cells
Reduced energy consumption/emissions and recycling - for example, companies that improve the heating of buildings, companies that recycle metals in electronics, and companies that produce battery packs to optimise the use of solar cells
Energy storage/power - for example, companies that develop batteries or fuel cells to store electricity
Extraction of the resources needed for the green transition - for example, lithium, copper, and rare earth metals.
AuAg Precious Green is a green technology fund that also invests at least 30 percent (maximum 50 percent) in transferable securities that have a value development that the managers assess will be affected by the market development for gold, but also other precious metals such as silver, platinum, and palladium.
Gold (and silver) has historically generated a good return, and its price reflects the amount of debt and credit in the financial system. The amount of debt and credit in the system is increasing more and more, which is why we at AuAg Funds believe that this asset class will be a natural component of a well-diversified portfolio for many years to come.
Why green technology funds are so important
As fossil fuels are phased out, electricity usage and the need for valuable metals are increasing. Globally, energy supply (and price) is an important issue. It is clear to everyone that the ability to produce and store electricity will play a big role in the future. So how can we produce electricity sustainably and affordably?
According to statistics from Our World In Data, electricity production by source in the world in 2022 was divided as follows:
- coal – 35.72%
- gas – 22.12%
- hydropower – 15.17%
- nuclear power – 9.15%
- wind power – 7.50%
- solar power – 4.52%
- oil – 3.10%
- bioenergy – 2.38%
- other renewables – 0.35%
The potential of our energy sources
Renewable energy sources such as solar and wind power have a great potential for growth in the electricity production sector. The cost of solar and wind power has decreased rapidly in recent years, making it increasingly cost-competitive with traditional fossil fuels. In addition, solar and wind power are abundant, widely distributed, and have lower environmental impacts than fossil fuels.
- Solar energy has the potential to provide a large portion of the world's electricity, as it is widely available and the technology is rapidly improving and becoming more cost-effective. The International Energy Agency (IEA) predicts that solar energy could become the world's largest source of electricity by 2050.
- Wind power is also a rapidly growing source of electricity, with the total global installed capacity increasing at an average annual rate of over 5% in the past decade. Offshore wind energy has a particularly high growth potential, as the technology is becoming more advanced and cost-effective and is allowing for the construction of larger and more powerful turbines.
Electrification is the future, and with the help of funds that invest in green technology, the transition can be smoother, the energy supply can be solved, and necessary metals can be extracted.
Why invest with AuAg?
- The funds fit well into a portfolio of traditional assets as they have a low correlation with the stock market.
- AuAg offers funds that focus on providing exposure to precious metals and elements within green technology. They are all characterised by the fact that the assets provide protection against monetary inflation and are necessary for the green transition – highly relevant trends today.
- The funds make a difference. The AuAg Precious Green fund invests in companies at the forefront of tomorrow's technology, and our other funds invest in mining companies that produce the metals needed to build green technology. The mining companies account for between 4-7% of global CO2 emissions. By only investing in the most sustainable mining companies, we can make a real difference.
You can start investing in green technology funds like AuAg Precious Green through fund platforms such as Nordnet, Avanza, SAVR, and Fondom. All platforms where the funds can be purchased are available on the respective fund page under "Invest."