Green Investing: 7 Ways to Invest in Sustainable Corporations and Industries, Discover a Beginner’s Guide
As the world becomes increasingly aware of the need for Environmental Social Governance (ESG), investing in green initiatives has gained significant traction. As an avid economist and environmentalist, green investing is of great personal interest to me. Green investing, also known as sustainable investing, allows individuals to align their financial goals with their environmental values. In this article, I want to share seven different ways to invest in sustainable corporations and industries, ranked in order of beginner friendliness to expert. Along the way, we will provide examples of companies and their mission statements to help you make informed investment decisions.
1. Sustainable Mutual Funds and Exchange-Traded Funds (ETFs):
Beginner
Investing in sustainable mutual funds or ETFs is an ideal starting point for beginners. These funds pool investments from multiple individuals and invest in companies that meet specific environmental, social, and governance (ESG) criteria. Examples of such funds include the Vanguard ESG U.S. Stock ETF and the Calvert Equity Fund. Their mission is to deliver competitive returns while promoting responsible investing practices. These publicly traded ETFs can be accessed via standard investing platforms such as Fidelity and more.
- Vanguard ESG U.S. Stock ETF (ESGV): A low-cost ETF that invests in U.S. companies with strong ESG practices.
- Calvert Equity Fund (CSIEX): A mutual fund focusing on companies demonstrating leadership in sustainability and corporate responsibility.
2. Green Bonds:
Beginner
Green bonds are debt instruments governments, municipalities, or corporations issued to finance environmentally friendly projects. They offer individuals the opportunity to invest in initiatives like renewable energy, sustainable infrastructure, and clean transportation. Notable issuers include Apple, which issued a green bond to support renewable energy projects, and the World Bank, which offers green bonds to fund climate change solutions. Green bonds are an excellent option for safe investments, as varying governments subsidize them.
- Apple Green Bond: In 2016, Apple issued a $1.5 billion green bond to finance clean energy projects, energy efficiency, and resource conservation initiatives.
- World Bank Green Bonds: The World Bank issues green bonds to fund climate change solutions, such as renewable energy projects and sustainable development initiatives.
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3. Socially Responsible Investing (SRI):
Intermediate
Socially responsible investing involves considering both financial return and the social impact of investments. You choose these companies based on their commitment to corporate social responsibility (CSR), which includes environmental sustainability, human rights, and ethical business practices. A prominent example is Patagonia, an outdoor clothing company with a mission to “build the best product, cause no unnecessary harm, and use business to inspire and implement solutions to the environmental crisis.” They have been an authoritative advocate in the push toward normalizing CSR practices for quite some time.
- Patagonia: A clothing company committed to environmental sustainability, responsible supply chain management, and activism for environmental causes.
- Domini Impact Equity Fund (DSEFX): A mutual fund that invests in companies with vital social and environmental performance records.
4. Impact Investing:
Intermediate
Impact investing focuses on generating measurable social and environmental impacts alongside financial returns. It typically involves investing in businesses or funds that address issues such as clean energy, affordable housing, or education. For instance, Acumen, a non-profit global venture fund, invests in companies that serve low-income communities and drive positive change.
5. Renewable Energy Stocks:
Intermediate to Expert
Investing in renewable energy stocks can be more involved but offers the potential for higher returns. As the renewable energy industry is relatively new, we are still watching to see who will rise and remain the authoritative player. Currently, companies like NextEra Energy and Orsted are leaders in the sector, specializing in wind and solar power. Their mission is to accelerate the transition to clean energy and reduce carbon emissions.
- NextEra Energy (NEE): A leading clean energy company in the United States, focusing on renewable energy generation, including wind and solar power.
- Orsted (ORSTED): A Danish company specializing in renewable energy, particularly offshore wind farms.
6. Green Technology Startups:
Expert
Investing in green technology startups can be riskier but potentially rewarding for experienced investors. Look for companies working on innovative solutions for sustainable agriculture, energy storage, water conservation, or waste management. For example, Beyond Meat, a plant-based meat substitute company, aims to transform the food industry by offering environmentally friendly alternatives to traditional meat products.
- Beyond Meat (BYND): A company that produces plant-based meat substitutes, aiming to reduce the environmental impact of traditional meat production through sustainable alternatives.
- Tesla (TSLA): An electric vehicle and clean energy company working to accelerate the world’s transition to sustainable transportation and renewable energy.
7. Direct Impact Investments:
Expert
Direct impact investments involve investing directly in projects or businesses that have a clear positive environmental impact. This could include funding a community solar project, supporting sustainable agriculture initiatives, or investing in eco-friendly real estate development. Opportunities may vary depending on your location and network.
- Local Community Solar Projects: Invest in local solar energy projects that provide clean energy to communities.
- Sustainable Agriculture Funds: Invest in funds that support organic farming, regenerative agriculture, and sustainable food production.
Conclusion
Green investing offers an avenue for individuals to support sustainable corporations and industries while seeking financial returns. Whether you are a beginner or an experienced investor, there are various options available to align your investments with your environmental values. These examples showcase different avenues for green investing and demonstrate how specific companies and funds are aligning their missions with sustainable practices and environmental impact.
Starting with sustainable mutual funds and green bonds provides an entry point for beginners, while impact investing and renewable energy stocks offer more advanced opportunities. Green technology startups and direct impact investments require more significant expertise but can yield substantial environmental and financial benefits. Green investing is a great way to create change with your dollars by showing your values. Remember, conducting your own thorough research and understanding a company’s mission before making any investment decisions is essential.
