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Top Green Investing Tips
- Choose a Green Investing Sector
Green investing sectors include renewable energy, organic and natural foods, and pollution controls and environmental cleanup. Each of these sectors is further broken into subgroups and sub-subgroups, according to Jeff Siegel of Green Chip Stocks. Choose the sector(s) which best aligns with your environmental and personal interests and scout for the best financial growth opportunities within your chosen category of interest. Although we would like to believe that all green securities are good investments, remember that there is risk when investing in any new technology sector or in any new company. Remember that diversification is key to any successful investment strategy. You can protect your funds and bolster multiple environmental sectors, through diversifying your portfolio by investing in a variety of green sectors. - Screen for Green
Create guidelines and boundaries for yourself when choosing which types of environmentally focused companies to invest in. For example, some green-minded mutual funds screen out things like tobacco and military products, but not nuclear power and clean coal technology. In addition, when investing in mutual funds decide whether you want to go with a fund that uses a positive screen or a negative screen when selecting which companies to back [see the "Getting Techie" section for more details on positive and negative screening]. - Beware of Greenwashing
Greenwashing is an important concept to keep in mind when evaluating all investment opportunities, but is particularly pertinent when deciding whether or not to financially back a specific company. Ask yourself: "What identifies something as a green product or service?" When reviewing a company’s green claims, do your research. Determine what is really involved in the technology they are developing or the claims they are making, and filter by how these answers line up with your personal values. Remember if a company’s green claims about their products, services, and operations turns out to be false, you will suffer too when the company’s stock plummets. Planet Green and TreeHugger outline a few tips on how to spot greenwashing when scouting for products and companies. - Create A Green Investment Strategy
As with traditional investing, personal green investment strategies are diverse and can be difficult to navigate. As an individual, you are faced with innumerable options when looking for new investment opportunities. Fortunately there are a plethora of resources available for you to help search out the best opportunities. Where to begin?- Ask Questions - Look into how your potential company deals with problems, how they relate with the community, and whether their environmental policies are green or just greenwashing.
- Peruse Sustainability Indexes – Indexes, such as the Dow Jones Sustainability Indexes are useful tools to gauge not only a company's financial but their environmental performance.
- Read Annual Reports and CSR Reports – Companies usually have their annual and Corporate Social Responsibility (CSR) reports available to download through their individual websites.
- Consult with a Green Investment Analyst – Many investment analysts are beginning to specialize in green and socially responsible stock options. For those with the means, this route can offer you a personally tailored experience when delving into green stock options.
- See the "Where to Get It" section of this guide for further suggestions on resources.
- Become a "Stakeholder"
Buying green stocks has become a sound decision for both the planet and for your pocket book. In 2007, the Dow Jones Sustainability Index rose by 10.4 percent, outperforming the Dow Jones Industrial index, which only rose by 6.4 percent. As more and more shareholders continue to opt for green stocks, the growing trend has not only become an indicator of increased value in these green companies, but has finally solidified a place for green industries within the market as a whole. What better time to become a shareholder in one of these future forward sustainable enterprises, helping the company, their environmental efforts, and your finances to grow!- Stakeholder – Rather than simply holding shares in a company, take a vested interest in your investments as a stakeholder. Stakeholders can affect or be affected by a company’s actions. Whether you own stock in a company that already has a strong positive environmental record, or in a company that desperately needs environmental reform, voicing your green opinions can push the buck for stronger environmental reform.
- Exercise your Voting Rights - As a holder of common stock in a company, you are eligible to vote and propose changes within that company. As an individual, unless you are the holder of a great deal of shares in a company, your vote may seem quite small. You may, however, be able to reach out to other likeminded shareholders to forming a larger voting body, in order to fight for sustainable reform within the company.
- Mutual Funds
Mutual funds are managed by money managers who use a pool of funds collected from many investors to invest collectively in a diversified portfolio of securities such as stocks, bonds, and other assets. While a traditional mutual fund’s goal is to maximize capital for the investors, the second goal of some funds is to invest in social and green equities, thus bolstering these emerging sectors of industry. When selecting which socially or environmentally responsible investment fund to entrust your green to follow these cues:- Investing Record – Look at their investing record and which social/environmental companies they currently support and have invested in, in the past.
- Screening - Determine what their green guidelines are and whether or not they use positive or negative screening.
- Voting - Key to note is that the managers of these funds are allowed to vote on stakeholder issues-–make sure their voting record, just as with their portfolio, is in line with your social and environmental concerns.
- Investment Clubs
Individuals come together to form investment clubs when they want to maintain more control over which companies they want to invest in than when investing in mutual funds, but lack the personal funds to be able to set up a separately managed account. By pooling their money in an investment club they can make larger financial investments (and in theory larger profits) while still maintaining a high degree of personal control. As with any peer group, express your personal goals and concerns, as well as your new found green investing expertise, to either start a green investment club, or to encourage the members of your current club to make green through investing in green. - Community Investing and Microfinance
Investing in an individual or community is a unique way to both direct your resources toward a singular environmental effort, and to potentially change the life, environmental priorities and/or financial future of your chosen entity.- Community investment opportunities span the globe, from using your time as a form of investing by helping to green the spending of a local organization to investing in a community halfway around the world, via Microfinance lending.
- Microfinance, a form of banking, serves low-income individuals or groups who need a loan in order to start or grow their business. The goal of these loans is to give these people an opportunity to become financially self-sufficient and ultimately to boost economic growth within the communities they are a part of. The beauty of microfinance, from a lending standpoint is that not only do these loans give the lenders the opportunity to invest at a very low contribution level (often less than $100), but that the loans have a very high rate of return (in that the recipients usually have outstanding pay back records). Microfinance is often linked with sustainable micro-lending, giving you the opportunity to engage not only your social but also your environmental investment goals.
- Venture Capitalism (VC)
For those of you with a little more cash--several thousand to upwards of a million dollars--available, and also an interest in really putting your money where your mouth is, consider backing a venture capitalism firm or becoming a venture capitalist yourself! Green VC firms (Environmental Capital Partners and GreenSource Partners, for example) are few, but they are gaining ground by focusing on areas such as: renewable energy, green technology, organics and public health related industries. - Retire Responsibly: Retirement and Pension Funds
Both publicly and privately controlled retirement funds invest your money over the course of your entire working life. Collectively, pension funds world-wide are the largest single investor category, ahead of mutual funds, hedge funds and insurance companies, and therefore have huge potential impact on social and green industry sectors, according to The Economist. How to begin? Investigate the investing strategy and policies of your current fund. Determine if your company places its employees’ funds in the hands of an asset management company or professionals hired to direct and manage their employees’ investments, or if they allow you as the employee to direct your own investments by selecting from a group of investment products.- Pension Funds Controlled by an Asset Management Company – If your company puts its employees’ funds in the hands of a single entity, you may have limited control over the companies the entity chooses to invest in. Look at their plan to determine whether they have a social or green investing strategy in place. The bad news is that if you find your pension fund is investing in companies that do not fit your green criteria, you may have limited ability to switch your plan. In this circumstance, its best to explore alternative options offered by your company and determine which if any will better suit your goals.
- 401Ks and IRAs – 401Ks and IRAs are both types of defined contribution retirement plans which are often participant-directed, or which allow the employee or plan holder to select from a number of investment options. When presented with self-guided options, determine which of the presented options most aligns with your personal, financial, and environmental goals.
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