People who are eco-minded are housing their funds with the sole purpose of having “green” investments that care for the environment. This may incorporate efforts to reverse the effects of global warming, develop alternative energy, clean the oceans, and increase the pace of sustainable development. Due to these things, at present, there are several public companies that publicize their support to green projects, numerous green mutual funds, and a number of green stock market indexes.
One should note though that going green doesn’t necessarily delineate a profitable investment. However, if you find contentment in utilizing your funds to protect the environment and put forward earth-friendly changes, then green investing is definitely for you.
Understanding Green Investing
Green investing is a viewpoint that encourages utilizing investment dollars to green projects and businesses. Different investors view green companies in various ways. For some, it just means that the enterprise is involved in solving predicaments in the environment – producing organics and developing energy sources, for instance. For others, an enterprise becomes eligible as green if it conserves natural resources, recycles, and in general operates business in an environmentally-conscious manner.
“Socially Responsible Investing” or SRI is frequently utilized interchangeably with “green investing”, though SRI has wider focus since it integrates firms that have affirmative effect on society and not just limited to the environment. For instance, a company that has good programs for its workers specifically or donates considerable amount of money to charity may be deemed as socially responsible. Thus, while green mutual fund investing or other green investments are socially accountable, not all socially responsible business ventures are green.
Types of Green Investments
The following are some of the green investing options to create a green portfolio:
- Securities – These individual stocks allow investors to translate their investment capital to, possibly, a handful of companies that convene to their performance and environmental qualifications.
- ETFs and Mutual Funds – Placing money in a pool of securities grant average investors a cost-efficient method to diversify their portfolio in various industries and sectors. The popular green mutual funds are Green Century balanced (GCBLX), Portfolio 21 (PORTX), equity (GCEQX) funds, as well as the Winslow Green Growth Funds (WGGFX).
- Bonds – These investments are quite a new category in green investing. Green bonds actually produce funds for eco-friendly enterprises. When furnished by governments to provide money to green projects, this fixed-income instrument may award tax-exempt income.
To come across with certain investments that suit your qualifications for greenness, you can make use of popular search engines and employ keywords such as “green mutual funds”, “green stocks”, “green investing, “green bonds”, and other similar terms.
Choosing Green Investments
Today, there are various green investments to pick from. When establishing your green portfolio, look for investments that complement your environmental criteria. Make sure you stay away from firms that overemphasize their greenness, and assess the business’ financial performance.
Comparing Green Investment Opportunities
Determine your criteria for your investment portfolio by providing answers to the following questions:
- Do you plan to focus on a company that develops environmental solutions, or is it sufficient for an enterprise to have a strict recycling or energy conservation program, or just financially supporting the environmental projects?
- Are there specific projects or industries that you don’t prefer? For instance, would you like to invest in the timber business if the company with the stock you buy complies with sustainable logging operations and expend funds on reforestation and preservation?
- Do you have the appetite for risk to house your money in “pure play” green investments – companies that generate a huge portion of their profits from green activities and innovations, green products, and, thus, have the probability to become more volatile? Or would you like to have greater stability from firms that are involved in other industries as well?
When buying bonds or individual stocks, evaluate each one and find out its suitability to your portfolio.
Steer Clear of “Greenwashing”
The investing for dummies information will tell you to stay away from scams. Keep away from companies that utilize environmentalism as a significant part of their marketing technique. Known as “greenwashing,” exaggerating a fund or enterprise’s greenness is a strategy for some companies to become more appealing to particular investors.
Monitor the Investment’s Market Performance
While trying to find out if an investment meets your “green criteria”, don’t forget to learn about its historical financial performance. You should make choices that characterize your values while making your funds grow.
An efficient strategy to weigh up an investment is to match it against a benchmark. Typical benchmarks are the S&P 500 and Dow Jones Industrial Average (DJIA), although there are others that you may consider.
In 1990, a fresh, new index, the SD400 or Domini 400 Social Index, was launched. The index incorporates firms that work with specific standards for environmental and social responsibility. This index is usually employed to benchmark or evaluate the performance of a green mutual fund. While Domini 400 was the earliest social index, at present, it is no longer the only one.