The universe of environmental investments is large enough to offer a workable range of choices for all the main types of investors, be they income or growth focused, and conservative or aggressive investors.

But environmental investment is no different to any other type of investment - before moving to portfolio construction, investors need to answer the same questions about diversification, asset allocation, investment goals and risk tolerance as they would for any equities portfolio.

The added question for environmental investors is that they need to ask themselves whether they want to add an environmental theme to their existing portfolio, or whether they want their entire portfolio to be environmentally friendly. Their answer can help determine how they resolve the key issue of diversification.

Investors who are drawn to the environment solely for its potentially high returns may want to do no more than add an environmental theme to their existing portfolio. These investors can simply bolt one on. Along with the target returns, the environment can have the added benefit of increasing the diversification of the existing portfolio, and where there happen to be some environmental investments already it may encourage them to better organize this part of their portfolio.

It is not nearly as straightforward for investors with a deeper commitment to the environment and who want as much as possible of their portfolio to be environmentally friendly. Such investors can still achieve a high level of diversification, but it will not be as high as for general investors. There is a trade off between environmental commitment and diversification given less diversification is available for investors whose commitment precludes them from investing in mining, oil, coal, uranium, high carbon energy generation, dangerous chemicals, native forest destruction, ocean fishing, energy inefficient properties, and other environmentally damaging activities.

For these investors, it is particularly important to maximize the diversification within their universe of suitable investments. This is where IOAM can provide a solution.

IOAM have conducted due diligence on many ethical and sustainability focused investments and have produced a number of discretionary portfolio offerings to suit most investor’s requirements.

If you would like further information on our range of environmental-focused portfolios please contact us.