Investing in startups is a risky venture. You have to believe in the idea before you can commit to it. Unlike investing in a blue chip company, there’s no guarantee that your startup will still be there in five years. One aspect of an investment you must consider is sustainable investment.
There are many guides to sustainable investments and why you should do it, but this article is going to go into how to make sure you’re doing it.
What is a Sustainable Investment?
Sustainable investing is about investing in companies that are committed to doing their best for the environment. It’s difficult for startups to direct their attention towards this when they’re so low on funds, which is why they don’t come around often.
A sustainable investment is a feel good investment. It’s the exact opposite of a sin stock, where people invest in companies involved in morally questionable activities.
Focus on the Company’s Function
The first step in this process is to focus on what the company actually does. A sustainable company isn’t necessarily specifically dealing in saving the rainforest or protecting endangered whales. Their operations are simply not impacting in a negative way on the environment.
The CEO of Your Company Formations Ltd says, “We are a sustainable company because what we do is not leaving a large carbon footprint on the environment. We make sure that what we do is harmless, and we even apply this to what we do within our offices, so our employees are limiting their carbon footprints.”
After you confirm that the startup’s function is not having a direct or indirect negative effect on the environment you can move to the next step.
Does the Company Have a Policy on Sustainability?
Most companies are not hurting the environment not because they’re focusing on that but by accident. They have no focus on it and there’s no guarantee they won’t evolve into a company that does cause damage to the planet in the future. Every startup you invest in should have some sort of policy on sustainability.
This doesn’t mean their entire company has to be committed to the cause. It simply means that in a small way the company pledges to reduce its effects on the environment around it.
For example, it could commit to only using environmentally friendly cleaning products in its offices. It could also introduce a recycling plan for office waste.
A policy like this is a demonstration that you’re dealing with a sustainable startup.
Where is the Transparency?
One point you have to take into account is the fact that startups can look glamorous from the outside and when they’re looking for investment. You want to make sure they follow through on their promises for as long as you’re an investor. Ask about their culture of transparency.
The company should release regular reports of their progress and activities. If the startup has already been up and running for a few months, check them out yourself. Take a look at what they’ve published and see if it resembles a company you would like to invest in.
How Important is Sustainable Investing?
A big change in the way investors invest is needed to encourage businesses of the importance of caring for the environment. Nobody is demanding that every business become committed to saving the planet, but they should be aware of the impact they’re having on the world around them.
For a lot of businesses, the only strong message is one that revolves around money. Show the business world that investors like yourself are not going to support companies that don’t do their part for the planet.
Sustainable investing will ensure that the world is a better place.
Last Word – Making Your Sustainable Investment Stick
Just because you’ve invested in a startup doesn’t mean you have to keep investing in that startup. If they don’t keep their promises, feel free to pull out at any time. An investor who supports a startup has no obligation to keep supporting that startup if they feel their goals are no longer aligned.
Sustainable investing has gone mainstream. What do you think investors should think about when they decide to make an investment in a sustainable startup?
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