Go Green With Your Investments
It feels like everyone is going green these days: green cars, green construction, green business. There’s a “green” solution for just about every aspect of life, from the clothing we wear and food we eat to how we consume energy and natural resources.
What about financial products? Traditionally there is not much environmental concern to be found in investing, but that’s started to change. As social corporate responsibility becomes integral to how many companies do business, “green investments,” those that leave the planet in a slightly better place while benefiting your portfolio, are becoming more feasible.
Given that most sustainable and environmentally friendly initiatives tend to require some sort of change in your lifestyle, it may seem like green investments would require a substantial change in how you invest. While it’s true that you need to be more cautious, the basic “green” financial products are not that much different than traditional investments.
Want to go green while making some green for yourself? Let’s check out how you can start incorporating these sustainable products into your portfolio and investing in companies that strive to leave the world a better place.
Green Stocks
The most straightforward way to invest in green companies is by purchasing stock. Many established companies in industries such as renewable energy are publicly traded already, and you can find startups with green products are getting reading for IPOs.
The main drawback of investing in green companies directly is the inherent risk that comes with purchasing any type of stock. This is particularly true with green companies that are new to the market. It’s difficult to predict how stock prices will rise or fall, and whether the company will fall flat on its face or thrive in the marketplace. You can mitigate that risk by doing the same things you would when investing in a normal stock: diversify your portfolio, pay attention to the market, and always do your research before buying. Talk to a qualified financial adviser before making major investment decisions, unless you’re adept at playing the stock market already.
Green Mutual Funds
Mutual funds are a popular choice for investment because they give investors with minimal capital access to a wide variety of products with professional management. Mutual funds invest in stocks, bonds, equities, and other products that are in line with the fund’s prospectus.
The main difference with green mutual funds is that all of the companies included in the fund are involved in environmentally friendly industries or have demonstrated a firm commitment to creating a sustainable future for the planet.
The main issue with green mutual funds is the potential variation in what people consider a green company to be. These funds are overseen by portfolio managers, and managed according to the stated mission in the prospectus. In this case, you should look closely at that prospectus as well as the mutual fund’s portfolio.
The major advantage of green mutual funds is the same as standard mutual funds: the risk is mitigated because of the diverse portfolio and the convenience of having a dedicated money manager.
Green Bonds
Green bonds are a safe investment that also helps the environment. Bonds are a popular choice to fund government infrastructure projects at local and federal levels, but other companies can issue them too. They work much like a loan: a company issues the bonds, which people purchase in exchanged for a promise of repayment plus a given interest rate, when the bond matures.
Companies such as Carbon Xprint facilitate the issuance and purchase of bonds that help companies improve their environmental footprint and allow investors to receive a healthy return in exchange. It’s a great way to obtain funding for green initiatives, but while bonds overall are less risky than stocks or mutual funds, they still have varying levels of risk depending on the terms of the bond.
