For most people, helping out the environment doesn’t mean completely overhauling the way we live. It’s simply choosing more sustainable ways to do what we already do. Like buying reusable grocery bags or purchasing clothes from environmentally conscious companies, green investing is a powerful way for you to drive change towards a more sustainable society.
Under the umbrella of socially responsible investing, green investing is the strategy of investing in environmentally conscious companies that make an effort to conserve natural resources, either directly or in their business practices.
While this type of investment offers the benefit of helping out a cause you believe in, it’s still important to consider all the risks and rewards associated with investing your money. Our ‘Demand Green’ portfolio has been developed for this very purpose.
What Is Green Investing?
The term “green” is commonly understood to mean environmentally friendly. But what exactly makes a company green? It’s important to understand that there are a variety of interpretations of the term.
Pure-play options include companies whose mission is to research and develop new technologies or processes that directly benefit the environment. Examples include companies that make solar panels or technologies to remove microplastics from the oceans.
Many people also broaden green investing to include companies whose primary goals and revenue streams are not environmentally motivated, but engage in resource-saving practices and institute eco-friendly policies. There are many gray areas when it comes to green investing, as a company can derive most of its revenue from environmentally unfriendly practices, like logging or refining oil, but still be considered environmentally conscious within their industry. At Demand Wealth all of our ‘Demand Green’ investments are always rigorously screened according to MSCI ESG criteria.
What Is Greenwashing?
Since environmentalism has become so popular, companies are making more of an effort to appear to care about their impact — look out for ones that only promote surface-level practices, while still engaging in harmful activities that they don’t advertise. Be wary of broad marketing campaigns that tout non-specific claims, or emphasize one small green initiative. Here are some specific things to look out for:
– Vague green terms in marketing materials like “eco-friendly” and “environmentally safe.”
– Green imagery on packaging, like trees or flowers. Images are often chosen specifically for their subtle impact on your perception.
– Claiming to be “Best in Class.” When it comes to certain industries, being the best among the worst is hardly a strong claim.
– Bending the truth and/or misdirection. Companies will fabricate labels and awards that make them seem greener, or directly fib about their product’s impact on the environment. If the proof to any claim seems hard to find, it’s very possible that it may not be true.
How to Add More Green to Your Investments
Green investing doesn’t require that you invest only in companies with a purely environmental goal. You can take the time to look into the practices of other companies and choose to invest in ones that make a solid effort. At Demand Wealth, we recommend that your investment portfolio consist of many different investments at a variety of risk levels across many industries. By applying this financial advice to socially responsible investing, we take a holistic approach to how your investments impact the environment, while enjoying the benefits of global diversification as well.
We take the time to look into the companies you’re invested in, as well as divest from fossil fuels and other industries that directly harm the environment. Ultimately, you’re in charge of the impact you’d like your investments to have and in what areas. Remember that some companies may make an effort to “greenwash” their practices in order to appear more environmentally friendly.
Other Ways to Leverage Your Investments
If you aren’t comfortable investing your money in the traditional sense, or are looking for additional steps to take, there are plenty of ways to make your money work for the environment.
Use consumer power: Everything you buy, from food to handbags empowers the companies you’re buying from. Choose recycled materials and environmentally conscious products when possible to drive change.
Get vocal with your organizations: Along with investing, use your time to convince organizations like schools to divest from companies that negatively impact the environment.
Utilize shareholder activism: Some types of shareholders can vote on board members and proposals that support green initiatives.
Contribute to crowdfunds: Green startups, projects, and inventions often turn to crowdfunding for their initial round of financing. Look for a cause you believe in to contribute any amount you can.
Invest your time: Volunteer at a local garden maintaining plants, or spend time cleaning up a green space in your community. Whatever you contribute to the world around you helps.
Making A Difference
The weight of saving the world is a group effort. Taking these small actions and making some changes won’t provide you with super(wo)man status, but don’t underestimate how little steps can lead to great things! If you’re looking to make an eco-conscious impact with your investment dollars and include it in your overall financial plan. Schedule a video conference with one of our advisors to find out more about the ‘Demand Green‘ and ‘Demand Vegan’ portfolios today.
This report is a publication of Demand Wealth. Information presented is believed to be factual and up-to-date, but we do not guarantee its accuracy and it should not be regarded as a complete analysis of the subjects discussed. All expressions of opinion reflect the judgment of the author as of the date of publication and are subject to change.