Green entrepreneurship has become a lot more popular in recent years. Back in 2012, the market for goods and services with a low carbon footprint was around $5.4 trillion. This market has been growing steadily ever since. This has coincided with a sudden boost in ethical investing. Many green entrepreneurs are also committed to ethical investing.
The market for green products and services is being driven by both entrepreneurs with a personal conviction to help the environment and a strong demand from environmentally conscious consumers. On the surface, it seems that the number of consumers claiming to support eco-friendly businesses bodes well for green entrepreneurs and green stock investors.
Unfortunately, many entrepreneurs discover that building a green business is more difficult than it seems. Harvard Business Review published an article about the challenges of developing a profitable sustainable business. PBS also published a similar article last year. Intuitively, this also means that it can be difficult for them to find lucrative sustainable companies to invest in to grow their retirement account.
As a green business owner, you need to be prudent when developing a retirement portfolio. You will be investing on a variable income, so it is important to make sure that your money is properly invested. This means that you need to do your due diligence before investing it securities, regardless of whether or not they align with your views on sustainability.
Eco-friendly business models are only one variable that you can take into consideration when developing your retirement account. You should also pay close attention to the following to ensure your investments meet your financial goals.
Take advantage of a reliable portfolio tracker
Stock portfolio trackers have come a long way since Google and Yahoo first released their own. Those two portfolio trackers aren’t as popular these days, because they filled them with lots of annoying sponsored content.
Fortunately, there are a lot of other portfolio trackers worth looking into. There are a number of benefits of using these tools:
- You can keep track of all of the investments in your portfolio. You will see that some of them are outperforming the market, while others are laggards.
- You can see how much money you can afford to lose from various trades without compromising your ROI targets.
- You can use your portfolio tracker to better outline your investing goals, which includes finding the optimum balance between risk and return.
Portfolio trackers can be extremely useful for any investor. You shouldn’t skimp on them just because you are also concerned about the sustainability ratings of the companies that you invest in.
Make sure that the green companies that you invest in go beyond the hype
A lot of companies are trying to ride the sustainability wave these days. These companies claim to be concerned about environmentalism, but they do very little to implement eco-friendly business models. At the end of the day, they are simply trying to attract customers.
These types of companies are not worth investing in from either a sustainability or financial perspective. You won’t be making a legitimate difference in reducing your carbon footprint by supporting fraudulent sustainable businesses. These companies also probably won’t have business models that will be profitable over the long term, because they are eventually going to be exposed as fakes.
Make sure that you only invest in green companies with unique and helpful value propositions
On the flipside, there are also a lot of genuine green companies out there. The downside is that many of them place more emphasis on the ethics of their business models than on profitability. You obviously don’t want to invest in these companies either. This isn’t a good way to be an ethical investor.
It is important to make sure that you understand the value that any sustainable business offers to its customers. Is it another generic solar panel manufacturer? Then this company is probably going to have a hard time standing out amongst all of the competition. On the other hand, if the company solves a sustainability challenge that has been addressed by other companies, then it will probably have a much higher chance of being profitable.
Don’t neglect to look at financial ratios
All publicly traded companies are required to share their financial reports with investors and the general public. You should pay close attention to this information.
The most important financial ratio to look at is return on equity. Warren Buffett says that looking at the return on equity ratios of companies that he invests in is the reason that he has consistently outperform the market for decades. You should also look at various liquidity ratios, such as debt to assets and debt to income. These can give you an idea as to whether or not the company is overleveraged.
Look at both financial and sustainability factors win investing in green companies
As an eco-friendly business owner, you probably want to invest in sustainable companies when you’re planning for retirement. While it is admirable to support sustainable brands, you also need to make sure that they will be profitable. This is essential if you want to grow your retirement portfolio over time.