What Is Green Pension ?
Green pension (also called sustainable pension) refers to retirement fund that makes investment in eco- friendly projects or companies (such as clean technology, renewable energy, green bonds etc.) to earn interest. It gives focus on sustainability and excludes investment in environmentally harmful projects. It has several benefits as well as some drawbacks which we are going to describe in this post.
Advantages Of Green Pension
The main advantages of sustainable or green pension can be pointed out as follows:
1. Reduce Carbon Emissions
It helps to combat climate change. It gives emphasize in sustainable farming, renewal energy, reforestation etc. that promotes sustainable practices and reduce carbon emissions.
2. Growth Potential
As we know that green pension gives focus on sustainability it has long-term growth potential because green technology and environmentally friendly investment opportunities are expanding rapidly.
3. Government Support
Many countries promote green investments and sustainable industries. So, governments provides tax breaks, subsidies and incentive to support eco-friendly businesses.
4. Mitigation Risk
Green pension fund avoids finding in environmentally harmful sectors. It helps to reduce environmental risk.
Disadvantages Of Green Pension
The main disadvantages of green pension are as follows:
1. Lower Return On Investment
It may have lower return than traditional options of investments. Therefore, green pension funds cannot generate higher revenue than traditional investments.
2. Higher Management And Research Costs
It requires higher management and research costs as well as more time and effort to identify ethical and green investments. So, it reduces the profit because of higher costs.
3. Limited Options
Another disadvantage of green pension fund is that it has limited investment options compared to other forms of pension plans. Therefore, it is difficult to attract potential investors because of fewer choices.
4. Risks And Uncertainties
Because of market fluctuation sustainable or green sector may have to face risks and uncertainties. It may also discourage investors.
Pros And Cons Of Green Pension In Short
Pros:
* It promotes eco-friendly industries
* It has long-term growth potential
* It minimizes environmental risk
* It enhances corporate responsibility
Cons:
* It requires more management and research costs
* It has lower short-term return on investment
* It has limited investment choices
* It requires long-term investment