Put Your Money Where Your Values Are: Green Investing

One of the rising investing trends of recent years is socially responsible investing. This category of investing focuses on investments that are meant to have some sort of social value, whether it’s investing in companies that make it a point to respect human rights, or investing in funds that refuse to include “sin” holdings of tobacco, alcohol and gambling companies. One segment of socially responsible investing is green investing also known as sustainable investing.

Green Investing: Sustainable Companies

If your financial values dictate that you support companies that engage in green practices, there are ways to invest in them. There are companies that provide green energy and green products. Companies that build wind energy components, or that develop bio fuels can provide opportunities for portfolio growth while helping the planet. However, you can also invest in companies with sustainable practices.

The Global 100 is a list of the most sustainable businesses on the planet. A a number of companies, from different countries, are listed, providing you the opportunity to diversify, while still investing in sustainability. Many of the companies also pay dividends, helping you create investment income while supporting companies with green practices.

Green Investing: Indexes, Funds and ETFs

Realize, too, that it is possible to invest in mutual funds, index funds and ETFs that invest in sustainable companies. There are ETFs made up of clean energy companies. There are mutual funds comprised of companies following sustainable practices. There are indexes made up of green companies, and you can invest in the funds that track them.

Choose Green Investments Carefully

Of course, just because you want to invest in a green company doesn’t mean you should take any opportunity that comes along. Just as you would vet any other investment, you need to do your homework as it relates to your green investing. Consider the size of the company, its management, its potential for growth, and what it plans to do to stay competitive and market itself. If you are interested in investing in a green startup, make sure that you feel good about the business plan and the people involved.

And, of course, you want to investigate the company to see if you truly agree that it is involved in green practices. Some companies claim to be sustainable, but they are not. Other companies might be considered “green” by some industry group, but you might not agree with the criteria. Do a little poking around on your own.

While you do want to support sustainable businesses, it’s important that you don’t just throw money at anything “green.” There are different online publications that can help you find green investments. These include SeekingAlpha, GreenMoney Journal, Clean Break, SRI Monitor and SustainableBusiness.com. SocialPicks can also be an interesting place to get green investing ideas.

You really can invest in a sustainable manner. Do your homework, and it is possible for you to find green investments that are better for the environment, while boosting your portfolio.

Have you considered green investing?  If so, why?  If not, what is holding you back?

33 comments to Put Your Money Where Your Values Are: Green Investing

  • brad

    The main thing that’s held me back from green investing is that someone explained to me that when you buy shares on the stock market, in most cases you’re buying shares from other investors, not directly from the company. Those shares are already out in the market, so you’re not actually helping green companies by buying their shares, nor are you “hurting” bad companies by boycotting their shares. So I’m not convinced that green investing/socially responsible investing actually has much of an impact. You can have an effect if you are an activist shareholder and go to shareholder meetings, etc., but for most of us small-time investors I’m not sure how much good we actually do by simply buying shares from the market.

    Instead, what I’m planning to do is to gradually shift a portion of my investments into funds that are used for local sustainability investments here in my province or in places that need economic investment (e.g., Inuit and First Nations communities, etc.). In this case I know that my investments are being used directly to fund green or sustainable activities and enterprises. My local credit union offers these funds, and while the MER is higher than I’d normally consider paying, I’m willing to make the sacrifice for the knowledge that I’m getting out of Wall Street and investing more directly in projects and enterprises that are focused on doing good things.

  • GiMan

    Nobody care anymore about green when their profits are cut by the crisis. So I don’t think now is the time for this. Maybe in 3 to 5 years yes, but not now.

    • I don’t see this as accurate at all. The major companies that have had profit cuts are still forging ahead with sustainable business plans.

      • brad

        In fact I remember seeing a study 5-6 years ago that found a strong correlation between sustainability practices and strong management at companies, which makes sense when you think about it. The companies that treat the environment as an afterthought (or worse) tend to be the ones in crisis mode that don’t have time or the inclination to spend resources on making their operations more sustainable. The companies that are well managed and organized, and doing well, will have time to devote to sustainability pursuits. So in fact if you invest in companies that are doing well by the environment, chances are you’re investing in companies that are going to perform well and provide value to their shareholders.

  • I’ve actually been doing a lot more research on this lately because of some writing that I am doing. I think this is not really popular right now but it has the potential to catch on with the upcoming generations as we become more and more concerned with the environment.

  • I think it’s important to note that, even if you aren’t directly “helping” a green company, you can feel better about the investment, since it aligns with your values. While you don’t want to invest in a loser just feel good about it, investing in a solid stock that also values sustainability can be another way to ensure that you are using your money in a way that lines up with your priorities and values.

    • brad

      Agreed, but my point was that buying shares isn’t really using money in a way that lines up with your priorities and values, because all you’ve done is to buy shares from some other investor who’s selling his or her shares. It’s that person, rather than the company itself, who benefits from the sale. It’s true that now you own a part of that company, but the money you spent to buy the shares hasn’t actually gone to that company, it went to the investor who was selling the shares.

      This is why I’m leaning more toward the direct-investment model, which is probably riskier and more time-consuming, but possibly more likely to make a difference.

  • You know, I’ve never actually thought about this before. I like the idea of it and will have to keep this in mind. :-) Great post.

  • I think eventually green companies will start making tons of money but the time is not now. Not sure when but I think buying these companies is too early right now. It could still be 5-10 years later…

    • brad

      Socially/environmentally responsible investing is not just about “green” companies, though. It’s also about conventional companies (Fortune 500, Fortune 100, etc.) that have strong environmental/sustainability programs. These are companies that have huge environmental impacts but also have huge resources available to push sustainability forward.

      There are several different kinds of screens that the SRI field uses — there are “avoidance” screens for people who don’t want to invest in companies that are doing “bad” things, and there are screens for environmental and social criteria. Not all of the companies that are screened through as good social/environmental investments are necessarily “green companies.” Many of them are big multinational firms.

  • Ben - BankAim

    Where I live, wind power is huge! Investing in a wind power company not only has huge potential, but its an amazing source of energy. I drive from Western Washington to Idaho every summer and I can’t believe how many wind turbines have been built.. hundreds!

  • I’d be shocked if you can find one Fortune 100 or 500 company you can consider green…take a look at so-called green ETFs/Mutual Funds it is complete bs – it can’t have one financial on it since they most likely invest in other companies that aren’t green.

    • brad

      It depends on how you define “green.” Strictly speaking there is no such thing as a purely green company, because producing products or providing services always has an environmental impact. Producing solar panels, for example, requires resource extraction, energy, and the use of hazardous chemicals. Patagonia, long held up as a model example of a “green” business, openly acknowledges the environmental impacts of its operations. But at least they’re trying to minimize their impacts.

      This is also the case for many big corporations in the Fortune 500/100. Yes, they’re damaging the environment, but they’re making an effort to minimize their impact, and it’s not just greenwashing. A company like WalMart, which of course would never be considered “green,” is in fact able to transform the markets for green products, organic foods, and products using recycled content simply because they are so huge. WalMart has adopted some pretty far-reaching environmental policies in recent years, and the NGOs and consultants I’ve talked with have been very impressed by the level of commitment shown by the company. I still think the damage they do outweighs the benefits, but they’re moving in the right direction. Shouldn’t we encourage that kind of behavior?

      You can paint things in black and white, and write off all big corporations as purely evil, or you can try to encourage and support their efforts to clean up their act.

      • The thing I wonder about Brad, is how much of the sustainable business effort is meant to better our world, to lessen the impact these companies have on resources etc versus what percentage of their motivation is marketing and strategic planning for a widening market.
        Yes, it makes sense for Walmart to do X, Y and Z – but they are also driven by consumer demand and profit and i’m quite sure they know full well that by offering organic or green they gain publicity and more market share. Drive for profit or for the betterment of the earth – the line is very grey.

        • brad

          But in the end, does the motivation matter? I care more about results than what drives them; if the results are motivated by a desire for profits and market share, I’m okay with that as long as the environment is better off.

          Profits are a powerful motivator; one could argue that they’re a more powerful motivator than the desire to do good. I’m all for harnessing that power and putting it to use for the planet.

          “Green” companies are motivated by profits too: you can’t stay in business very long if you never turn a profit. And publicly traded companies, no matter how green, are locked into the “profit and grow” paradigm in order to please their shareholders.

          The new California law that paves the way for Benefits Corporations interests me, though, as it seems like a very promising new model: http://www.good.is/post/new-california-law-will-boost-businesses-mixing-profit-with-social-good/

          • So Walmart is “green” in some aspects, but when the broader question about being “socially responsible” comes up, where do they land? Poor IMO. Workers have no rights, benefits are crap or don’t exist, their products are usually made anywhere but “local” (read: China). So yes, they are profiting on selling organic food – great. But where is the food from? How far does it travel (aka how much fossil fuel is burnt in transportation and production) to get to the shelf or produce aisle? How are the workers in the foreign countries treated, what is their compensation like?

            In the end, I doubt you find a rosy answer once you look beyond the “hey, Walmart sells organic food!” and delve deeper into their business practices. (not just Walmart – they are just an example). Their motivation, imo, is simply profit. They hide so very much from us, put band-aids on the bad things we can see and promote a small sliver of their “good doings” – just to make money. I don’t think Walmart cares about much else. If selling Organic will make them money, they’ll sell it. In all likelihood they’re not in it for the ethics.

    • I plan a post on this Evan. The indicies/ETFS are a joke IMO. “Best of” – but then you have mining or oil companies included. They’re just the “cleanest” polluters …

  • brad

    Regarding WalMart, as I said above in my earlier comment, I think overall they’re doing more harm than good. But they are doing an awful lot of good too, and to dismiss that would be shortsighted. It’s a lot more than just selling organic food; they’re working with their supply chain and it’s having ripple effects that are causing positive environmental changes upstream to reduce waste, toxicity, energy use, greenhouse gas emissions, etc. This is big, and they’re struggling with it because it’s so big, but there’s a lot of stuff going on behind the scenes; See here for example: http://makower.typepad.com/joel_makower/2010/07/walmart-and-the-sustainability-index-one-year-later.html

  • I am all about investing to match my values. I don’t feel comfortable investing in a company or index that doesn’t do what I feel they could be doing when it comes to sustainability. The issue with my approach is it isn’t always the most profitable. However I must say I feel much better knowing that the returns I do make are on something that I feel comfortable with.

  • Andrea

    I have thought about it, I had some mutual funds before (set up by parents, knew nothing about it) and once I started researching the fund and realized there were quite a few energy companies and oil companies in the fund… I didn’t like it. i like investing in a company who’s values I can stand behind.

  • Moneybiz

    Very nice guidelines, thanks for this wonderful share.Your post is absolutely great! Like me, pretty much sure lot of your readers had a great knowledge after they read your post. Thank you so much for sharing this!keep up the good work!

  • karen

    I started researching the fund and realized there were quite a few energy companies and oil companies in the fund…Thank you so much for sharing this!keep up the good work!

  • As a young person new to investing, the knowledge that my money could be going to fund companies that I can’t ethically support (whether it is direct or not) has prevented me putting any money in the market so far. I try my best to purchase products in my day-to-day like that I am comfortable supporting and I feel like it should be similar with my investment strategy. I think it’s a false dichotomy to pit profits against sustainability – green companies tend to have management and business practices because they recognize the importance of long-range planning and that sector of the economy is booming right now.

  • canadian mortgage calculator

    Very nice post…I hope you will write more on this topic…thank you

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