What constitutes a green company? Actually, your answer will probably vary from investor to investor. Green investing involves putting investment dollars into environmentally friendly companies. Some might only consider companies that actually address environmental issues. A company that produces solar panels would be a good example.
Other investors might consider a company that recycles and shows a general environmental awareness. If you’re interested in green investments, you’re not alone.
Check out these options if you wish to invest in green companies:
- Individual stocks. There are rankings available with regard to just how “green” a company is. It’s important to fully investigate a green stock just as you would any other stock.
- Mutual funds and exchange-traded funds. This option provides an easy way to diversify your portfolio. There are mutual funds that specialize in green investing. Lists of these funds are available online.
- Bonds can also be green. Green bonds raise funds for green business ideas. These can be bonds offered by green companies or bonds issued by various government agencies to fund green projects.
Consider these ideas when selecting green investments:
Identify your criteria and find investments that match. Determine what you consider to be a “green” company. Are there certain industries you refuse to support? Figure out your tolerance level and find investments you feel good about supporting.
Would you invest in a logging company if they followed all the rules and regulations that pertained to sustainable logging practices? What about a company that created toxic waste, but disposed of it responsibly?
Are you willing to take on the risk of a company that’s developing new green technologies? These companies can potentially make you millions of dollars. However, these same companies are also more likely to go belly-up without ever returning a profit.
Be careful of “greenwashing.” Companies are well aware of the fact that many investors target green companies, so they have ramped up their marketing to appeal to these investors. That’s greenwashing.
- Some companies are willing to bloat their claims of environmental friendliness to secure investment dollars.
Do your due-diligence to ensure that the company’s claims are legitimate.
Evaluate the investment options. After a company has passed your green criteria, it’s still important to determine if it’s a good investment. Investigate the past performance. Analyze the investment in the same way you would a non-green investment. Green investments can still be poor investments.
You are probably familiar with the Dow Jones Industrial Average and the S&P 500. There’s also an index, called the Domini 400 Social Index (SD400) that tracks the performance of stocks that meet certain environmental and social standards.
- The SD400 can be used to compare green mutual funds and their relative performance.
Remember to also compare these to the performance of non-green investments.
Consult a green investment professional. There are financial advisors that specialize in green investments that can provide excellent advice. Of course, you can also do research on your own. You can learn a lot on a Saturday afternoon.
- Keep in mind that there are many green investing websites and publications that cater to the green investor.
Many eco-minded individuals are choosing to invest their money in line with their conscience. These investments can help to reduce global warming, clean polluted lakes and rivers, as well as develop new alternate energy sources. Hundreds of companies claim to be green, and there are a few dozen green mutual finds.
Just remember that a green investment doesn’t necessarily guarantee a lucrative one. Choose the best investment options from those that meet your green criteria.