Bankers, insurers, and others whose job it is to assess and manage risk are starting to acknowledge the existential threat that climate change may have on important assets. Indeed, without sharpened focus on the environmental, social, and governance (ESG) performance of publicly traded companies, big companies may find themselves liable for lack of “fiduciary responsibility” to include such things as a company’s ESG data or vulnerability to climate risks.
In November, 2017, Moody’s Investors Service outlined its criteria for incorporating climate change into its credit ratings for state and local bonds. When climate risk and other environmental and social indicators achieve par status with traditional financial metrics and risk calculations, people start to take notice. And the mainstreaming of sustainable business opens up many opportunities for investors to go in new and potentially highly profitable directions.
Moving toward Big Business Green Investments
Renewable energy markets, including for efficiency and storage, and next-gen technologies, such as artificial intelligence and synthetic biology, are now viable investments within the sustainability marketplace. If you’re ready to take the plunge while keeping your trading costs down with competitive spreads, commissions, and low margins.
CFD Trading Explained
Some of the benefits of CFD trading are that you can trade on margin, and you can go short (sell) if you think prices will go down or go long (buy) if you think prices will rise. You can also use CFD trades to hedge an existing physical portfolio.
With CFD trading, you don’t buy or sell the underlying asset (for example, a physical share, currency pair or commodity). You buy or sell a number of units for a particular financial instrument, depending on whether you think prices will go up or down.
For every point the price of the instrument moves in your favour, you gain multiples of the number of CFD units you have bought or sold. For every point the price moves against you, you will make a loss.
Contracts for difference (CFDs) is a leveraged product, which means that you only need to deposit a small percentage of the full value of the trade in order to open a position. This is called ‘trading on margin’ (or margin requirement).
What are the costs of CFD trading?
Spread: When trading CFDs you must pay the spread, which is the difference between the buy and sell price. You enter a buy trade using the buy price quoted and exit using the sell price. The narrower the spread, the less the price needs to move in your favour before you start to make a profit, or if the price moves against you, a loss.
Holding costs: At the end of each trading day (at 5pm New York time), any positions open in your account may be subject to a charge called a ‘holding cost’. The holding cost can be positive or negative depending on the direction of your position and the applicable holding rate.
Market data fees: To trade or viewprice data for share CFDs, you must activate the relevant market data subscription, for which a fee will be charged.
Commission (only applicable for shares): You must also pay a separate commission charge when you trade share CFDs. Commission on UK-based shares on the CFD platform starts from 0.10% of the full exposure of the position, and there is a minimum commission charge of £9.
The relationship between sustainability investments and CFD trading offers a range of functions that can hedge physical share portfolios. This is becoming a very popular strategy for many investors, especially in volatile markets, in which both opportunities and tensions are the backdrop to a shifting national financial climate.
This post is supported by CMC Markets; images from StockSnap