‘Passion investments’ and how sustainable investors can benefit

Alternative investments like fine wine, art, stamps, classic cars and watches are reportedly more profitable than shares. That’s according to the latest Coutts Index, which says so-called passion investments have returned 77% since 2005, compared to the 53% benchmark.

Investments of passion are really just ‘real’ assets which people can rely on as a source of value. The financial crisis has seen governments print paper money to hold up the financial system to keep society’s confidence in capitalism.

Holding onto real assets is something which investors can enjoy as well as being independent of whether central banks choose to print a further billion dollars for their source of value.

Real assets, of course, come with much greater uncertainty over true value. They are less liquid and so often, you cannot simply turn them into cash when you want to. For most people, the simplest form of a real asset is a second property and we know that there is huge investor appetite for this type of investment in the UK.

In the investment world, frequented by financial advisers, there are big regulatory pressures not to advise clients to invest in funds of ‘real’ assets because they are not liquid and they do not conform to the Financial Conduct Authority’s (FCA) view of what is appropriate for a retail client. These are for sophisticated investors. They usually sit within what the FCA describe as non-mainstream pooled investments’ (NMPIs), and cannot be promoted to retail clients under new regulations.

In the environmental world, the closest an investor can come to owning real assets might be a solar park or a wind turbine, which are small infrastructure assets and rely for their returns on the regulatory environment of the electricity market.

Many investors may be excluded from learning about these by virtue of the fact they have not been deemed a high net-worth investor by their financial adviser, or the compliance function at the financial adviser does not permit the adviser to talk about these types of investments (or indeed because their adviser simply does not know or understand about these types of investments).

Thus, for an investor keen on this area, the choice may be to change financial adviser, or to have a look at some of the crowdfunding sites such as Abundance Generation to learn about some of the opportunities.

Mark Hoskin is a partner at London-based financial advisory firm Holden & Partners.

Further reading:

Top 10 reasons to invest in renewable energy projects

Why investing directly in renewables projects is a worthwhile venture

The tipple point? Climate change could impact wine production

Why investors should consider community-owned renewables

Abundance Generation: crowdfunding the future of energy