Green Investing — The Next Step to Green Living
So you recycle, you use biodegradable cleaning products, eat organic, conserve water, and bike to work — how much greener can you get? If you are fortunate enough to have a little discretionary income, rather than investing in another hemp sweater, you could actually invest in the company that makes them. It’s called Socially Responsible Investing (SRI) or eco-investing.
More and more consumers and investors are beginning to show an affinity for understanding and protecting their environment. Investing in environmentally and socially responsible companies can also prove to be profitable. But, just because a company is “green” doesn’t necessarily make it a good investment. If the company you support isn’t making any money then neither are you. Also, beware of “greenwashing” — a company may profess to be more eco-friendly than they actually are.
“If the company doesn’t care about the environment, then it probably doesn’t care too much about its employees, or community or other stakeholders,” says Jackson Robinson, president of the Winslow Green Growth Fund.
So, first of all, find a company or investment group that is in alignment with your values and goals, then do your research. Are you more concerned with social/ethical issues, such as poverty, enhancing educational opportunities, human rights, animal testing, etc., or environmental issues, such as alternative energy sources, water conservation, and the effects of deforestation and pollution? There are a wide range of choices; find your niche.
With regard to environmentally concerned companies, there is a distinction between “green” industries and companies with “green” policies. According to an article on the Investopedia website, “The green industry is comprised of companies whose products or services directly benefit the environment. Some of these companies may provide green products for domestic use, while others may provide products and services to help other industries operate in a more environmentally friendly way. Companies with green policies represent businesses that have adopted practices or guidelines that lessen the impact of their operations on the environment.”
But don’t throw all those green eggs (sorry, couldn’t resist) in one basket. Diversification is the key to a successful investment strategy. 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. Every fund has its own unique set of investing guidelines.
For instance, the investment company Portfolio 21 states that it “invests in companies designing ecologically superior products, using renewable energy, and developing efficient production methods.” The Winslow Green Growth Fund “targets green market sectors like renewable energy, natural and organic products, and recycling, as well as what it considers environmentally responsible companies.”
And the non-profit Green Century Funds seeks to “further efforts to preserve and protect the environment — efforts that include: campaigning for the protection of clean air, clean water, and open space; filing lawsuits against companies that illegally pollute; and advocating for reduced use of toxic chemicals and reduced emissions of global warming gases.” These are just three of a growing number of mutual funds to choose from. According to an article in the Los Angeles Times, as of 2007, there were 260 mutual funds that marketed themselves as having been screened as socially or environmentally responsible investments.
Be sure to look at the individual companies the funds are investing in. Remember, green investments, like all others, can hit rough patches when the economy fluctuates. Past performance is no guarantee of future performance. Check managers’ voting records as a stakeholder to make sure they are in line with your concerns. Read annual reports and Corporate Social Responsibility (CSR) reports, such as those from CSR Wire. While there is debate as to whether a good CSR is relevant to financial performance, it does let you know if a company is exercising socially responsible behavior .
Brent Kessel, co-founder of Abacus Wealth Management — a spiritually based firm that strives to make environmentally sound investments — says it is wise to invest in an array of companies that are making an profit — a basic investment tenant that was overlooked in the initial rush to jump on the green bandwagon. Kessel also says that you may not see an initial return on your investment.
“That’s because green products and services are often more expensive than their conventional counterparts, and during hard times, discretionary spending is usually the first to go. But to ignore their long-term potential is shortsighted.… Investments in alternative energy companies, for example, probably won’t pay off immediately, but they might in five to eight years,” he said. (LA Times, January 9, 2009)
Going green is a process, not an overnight endeavor — but it can be a fulfilling and profitable process that is worth your time and your investment.
There are a myriad of online sources for green investing advice and financial news. Try the Social Investment Forum, Green Money Journal, Treehugger, or Planet Green. Forbes and Kiplinger magazines also have timely information on the green market sector.
Blue Planet Green Living (Home Page)