Are you looking to make your investment portfolio more environmentally friendly? You aren’t alone! The market for ethical and eco-friendly investments is now worth over $51 billion.
Eco-friendly investing can be great for realizing both financial and green living goals. Investments can be a big part of financial planning for those interested in increasing personal or business wealth. They can now have the additional bonus of helping the environment when people choose to make green investments. Ensuring all or some of your investments are green can help you save money. If you are a business, it can also improve your reach and diversify your customer base as more people put sustainability at the top of their priorities.
Green investments ensure that the money invested is used to back environmentally friendly products – such as funding renewable energy companies. These types of investments sit under a winder ethical investing umbrella and are becoming increasingly popular as consumers and individuals, in general, become more socially and environmentally conscious.
By choosing ethical investments, investors can align their own ethical values and beliefs by choosing appropriate assets and stocks. These green investments not only benefit society and the environment – they have also been shown to outperform the returns of their non-ethical counterparts.
Top Tips For Making Green Investments
With the internet full of investment opportunities, it is now easier than ever to make green investments. Investors should not be tempted by glossy marketing images of wind turbines and shades of green – some intelligent decisions need to be made. The processes and values of the potential investors must be fully understood so decisions can be made on which investment opportunities should be included or excluded and why.
Terms such as ‘green’, ‘sustainable’ and ‘environmentally friendly’ are subjective. Different investments will use different principles based on their views of what these terms denote, and not all investors will agree with them. To ensure only the best investments are being made, the following tips should be considered:
Complete Thorough Research
It is essential to carry out a lot of research before making any type of investment, green or otherwise. Knowing that the money being put in is supporting a company that is going to do positive things for the environment is a must for green investments. In addition, you need to trust that the company invested in will make ethical choices with the investment. This reassurance will make investors feel more confident down the line.
Ask Lots of Questions
During the investment negation process, the investor should ask as many questions as needed to understand what they are getting themselves into. By asking precise questions about how the business is run, what types of ethical producers are in place, what the investment will be spent on – it will help investors get a complete picture. Of course, all the details should also be provided in writing, so there is some additional investment security.
Align Values with Investments
There are many green investment opportunities out there, so the investor must align their values with any investments made. They should only put money towards issues they feel passionate about and truly believe in. For example, if investors believe strongly in reducing fossil fuel use, they may choose to invest in solar energy stocks.
Watch Out for Additional Fees
Some green funds have exceptionally high management fees because they are considered niche. The additional fees can eat into profits so should be averted if possible as they can add up. Apart from supporting a green cause, investors will want to consider the potential return of their investment and want it to be greater than any additional money needed to be spent on fees. A fee saving of just 1% per year can significantly impact the investment return over several years.
Actively Seek Out Opportunities
Although there is a need for additional funding for green projects, investment opportunities are unlikely to fall in front of investors. Instead, investors should seek out the best ethical investment by tapping into their network and finding out about the green companies that align with their sustainability values.
Look at Brown Companies Going Green
Another option with green investments is to look closely at brown companies that are looking to clean up their act. Investors willing to support companies that are working hard to become sustainable and fight climate change can have a huge impact. For example, there are some old oil and gas companies that have started up some very successful renewable energy divisions.
The Risks Of Investing
There are always risks involved with investments – money can be lost or the return expected may not be met. It is also worth noting that investing is not the best option for everyone. For those who aim to save for the short-term or are uncomfortable with the risk of losing their money as a result of an investment gone wrong, a savings account is probably a more sensible option.
Due to the rise in environmental awareness, there has been an increase in savings accounts that offer green incentives. For example, some banks pledge to plant a tree in a woodland every time a new account is opened, renewed, and funded. Some governments have also launched national green saving accounts, which use deposits within the accounts to help fund efforts to tackle climate change.
Those in a position to make green investments can help make a significant impact on the environmental matters that mean most to them. However, it is important to remember that green investments, as with all other types of investments, run the risk of the investor not making any returns and result in the investor losing all their money – including their initial capital.
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