Green investing is a way to put your money where your mouth is – in protecting and preserving the planet. And, hopefully, make a tidy sum doing it.
However, talk of “saving,” “protecting,” and “preserving” the environment is just that, talk. And, let’s face it, there has a lot of that been going around (I’m looking at you #COP26). Only when we start taking action can we begin to undo decades of climate degradation.
One tiny problem, though: We love our conveniences as humans. Why ride a bike when you can drive? Or, drive a regular, fuel-efficient vehicle when you can have a 4×4 fuel-guzzler for your weekend activities? Why not have them all?
The same applies to food. Livestock production uses almost 80% of agricultural land, and it occupies more than 30% of the planet’s land surface and, get this, contributes 18% to greenhouse gas emissions from methane, nitrous oxide, etc.
In contrast, most foods in vegetarian and vegan diets use fewer resources to produce and tend to be healthier. Indeed, you can now find more nutritious meat and milk options from vegetarian sources such as soybeans. But, prying steaks from people’s hands, that’s a story for another day.
Climate Change Apathy
Our apathy towards climate change protection may also stem from perceived double standards. Corporations, which contribute the bulk of greenhouse gases, get to do so and still cut their managers’ colossal bonus checks. They have numerous breaks, incentives, rebates, and everything else to help them become greener.
You, on the other hand, don’t enjoy such protections. In many ways, you’re on your own. If today an extreme weather event (brought about by climate change) slammed your house, you’ll probably be picking the pieces alone.
It seems that those most affected by climate change have the least say, while those who contribute the most have both the say and the resources to make things happen. They aren’t.
So, why not invert the game and play by a slightly different set of rules?
What is Green Investing?
Green investing is the term used to describe the strategy of investing in companies that provide goods and services focused on social or environmental responsibility. When investors choose to purchase shares of a company as a long-term investment, they choose to invest with their money.
Green investors also decide if they will invest in publicly traded companies, privately held or even social enterprises that focus on improving the environment or society somehow. The goal for green investors is to purchase a stock that will increase in value over time and provide them with a profit.
Green investments can include various companies, such as renewable energy companies, natural food retailers, and even social impact organizations. The beauty behind investing in companies that are “green” is that you not only profit but also help protect the environment.
Sustainable investing does not necessarily have to be limited to companies involved in renewable energy; it extends to companies engaged in cutting emissions from fossil fuels, lobbying for holistic environmental legislation, and developing new sustainable products.
How Does Green Investing Work?
Green investors typically monitor the environment and look for companies that are spending their time, effort, and money into creating new technologies or products that will help preserve resources while adding value to the economy.
They realize that our global resources are being used rapidly and are looking for ways to ensure they are used more efficiently.
People who invest in green stocks, bonds, and funds do so to ensure that the future is bright for us all despite possible environmental challenges that may arise down the road.
Companies involved in cutting emissions from fossil fuels can be profitable to invest in because they are responding to growing consumer demand while also choosing renewable energy over polluting fossil fuels. A good example is the electric vehicle industry.
The market for electric vehicles is at a growth stage, and because of this, many people are looking to invest. Tesla is a great example and has made a fortune for some investors.
Another way green investing can help the environment and help cut global emissions is by promoting mass transit.
For example, in New York City, there has been a push towards using electric buses to help cut down on greenhouse gases, and so far, it seems to be working. According to a New York Times article by Hiroko Tabuchi reports that “the city’s 11,000-bus fleet is rapidly shifting towards electric mass transit systems that cut down on emissions.”
Green investing is a big push now because we can’t continue living off of non-renewable energy sources – we need to find cleaner, renewable alternatives and see what we can do with them. The more people who get involved and start green investing, the better it gets, and the faster we can cut global emissions.
Risk vs. Reward
While many investors shy away from the term “green,” it’s important to realize that these investments are just like any other. Investors have to choose which companies, stocks, and funds they see performing best in the future then decide how much money will be put into them.
Green investing is a long-term play with many individual risks but huge potential rewards if you pick the right investments.
When it comes down to putting your hard-earned money on an investment, it’s best to rely on your research and not just your emotions. Be sure to look at a company’s long-term potential rather than just their environmental practices.
Even if you don’t have a lot, start small.
Take the time to research your investments with an eye on long-term potential rather than short-term gains. Before you know it, you’ll be improving the world with every dollar that goes into your portfolio.
What’s a “Green” or Sustainable Company/Stock?
A company or stock can be considered “green” or sustainable if it meets the following criteria:
1. Carbon emissions
The fewer carbon emissions associated with the company’s activities, the better its score on this factor.
2. Renewable energy
This is measured as a percentage of revenue produced by renewable energy sources relative to all revenue. Renewables include wind, solar, geothermal, and biomass). The higher the percentage of renewable energy sources, the better the score.
3. Environmental Record
This is measured as a numerical grade on how closely a company’s activities align with environmental concerns, such as human rights and worker safety, as well as whether or not it supports organizations dedicated to these causes (SEC Form 10-K). The higher the grade, the better the score.
4. Green Commitment
This is measured as a summary of the company’s green initiatives and how its goals contribute to environmental sustainability.
The higher the commitment, the better the score.
Green investing isn’t as easy as going out and buying a solar panel, but it’s still possible for investors of all kinds to find ways to put money into companies that have a high impact on the world and the environment.