You’ve switched out your bags, your bottles, and your light bulbs so you can reduce your environmental footprint and make the world a better place. But have you switched to green investments, too?
If not, you’re missing out.
Missing out on the chance to use your consumer clout to make a big difference.
Missing out on the opportunity to help innovative new green entrepreneurs get off the ground.
And missing out on a way to do well and do good at the same time.
We’ve teamed up with sponsor UK’s Moneyfarm to show you why you should shift to green investments—and how to get started.
What’s So Good About Green Investments?
Let’s start with what they are.
Green investments offer ways to invest your money in companies or projects that help protect the environment, like safeguarding our waterways and wildlife, generating less waste, promoting organic food, and helping to save energy and advance clean energy like solar and wind.
Some companies exist specifically to reduce the environmental impact of an industry. Tree-free paper companies come to mind, along with their commitment to protecting forests. So do the companies that have developed safe alternatives to throwaway plastic straws. You get the idea.
Other companies have taken significant steps to reduce their own environmental footprint, regardless of what they make. For example, even if Company A still builds widgets, they now use wind power to do so, and they’ve streamlined manufacturing so much they create almost no waste.
A third type of company may be providing a service that enables other businesses or consumers to tread more lightly on the earth. I’m thinking of companies like Solar City, which helps consumers and businesses install solar panels.
Whatever their product or service, these companies may need your investments to provide capitol to help them get a toehold in the marketplace and compete against more established (and perhaps, polluting) businesses.
But in addition, when you invest in green companies, you help change how products and services are made. If they reduce waste or save energy or protect the landscape, your money is helping to achieve those goals.
Investments in green companies can also help you make money, which is, after all, the point of investments, right?
Investing in “green” companies can be riskier than other equity strategies, as many companies in this arena are in the development stage, with low revenues and high earnings valuations.
Indeed, there are never any guarantees that you’ll make money on any investment.
But this joint report from USAID and UKaid reports that impact investments financially perform in line with other investments. That makes them safe enough to at least warrant a look!
How Do Green Investments Work?
As with other investments, you have several ways you can invest.
• stocks and bonds
• mutual funds
• ETFs (exchange traded funds)
You can also become an “angel” investor: you provide money to an early-stage entrepreneur to help get the business off the ground, in return for a share of the business as it grows and makes money.
You can manage your own portfolio, or you can work with a green fund manager to help you.
What I myself have done is created a list of priorities for my portfolio, and then directed my financial advisor to invest in green companies that match my priorities.
What do I avoid? Oil and gas companies, coal mining ventures, tobacco companies, companies that make a lot of plastic stuff, and companies that make junk food, to name a few.
What do I look for? Companies trying to solve problems like climate change, plastic waste, and deforestation.
Where to Start? With Research.
Lots of companies claim to be green and eco-friendly, but that isn’t always the case! When it comes to finding out if your IRA or, in the UK, ISA investments are actually going towards an ethical company, do some basic research before you invest.
• News. Before you open your stocks and shares ISA, read all the news about the green companies you want to invest in to make sure your investment is solid.
• Company Sustainability Reports. Companies will often update their investors with quarterly reports and annual reports. Read those reports carefully to get more specific information about the company’s sustainability goals, objectives, and achievements. What did they say they wanted to do? What did they actually accomplish?
• Regulations reports. Reports from the Financial Conduct Authority in the UK or these sources in the US will give you a glimpse into whether or not your “green” companies are actually keeping up with ethical standards.
If you’re working with a fund manager, he/she can analyze earning projections and look at a company’s performance history over time to help you decide how solid the company is and what level of risk is involved if you invest.
By the way, don’t overlook the companies you already believe in and shop at.
Do you have a favorite green business you already frequent, whether it be a market, fashion company, or car maker? Start there.
Green investing helps you do good and do well, too.
It’s one of the most powerful ways to put your consumer clout to work.
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