Driving a greater environmental impact is possible through not just direct action but investing. There are several types of green investments: ESG bonds, ETFs, stocks, and similar assets enable you to support planet-positive initiatives while saving for retirement. Even funding green startups or small businesses is a potential option.
Often, impact investing is linked to certain frameworks, namely the Environmental, Social, and Governance (ESG) guidelines and the United Nation's Sustainable Development Goals (SDG). It is possible to filter out traditional assets by whether they are an ESG investment.
But just knowing these guidelines isn't enough. With 68% of company executives admitting to greenwashing, investors are reasonably cautious when making an investment decision.
In this article, we will cover our top 6 simple green investing tips anyone can use:
1. Target Specific Initiatives
Whether you are using the SDG or ESG framework for selecting green investments (or both), it’s often helpful to focus on a narrow channel of initiatives. For example, suppose you are passionate about clean energy. In that case, investing in companies or startups that sell renewable energy or operate entirely on fossil fuel alternatives can make the research process faster and easier.
However, you might want to consider lesser-known aspects of sustainability. You may choose to support funds or businesses related to fair labor practices, gender equality, or affordable health care.
Targeting specific causes makes green investing much more manageable, especially for a new investor. Furthermore, focusing on a small group can also help you research more thoroughly.
2. Read the Documentation
Reading and analyzing all company documentation can help you determine whether they are greenwashing or not. Furthermore, some organizations are sustainable in one aspect, such as fair labor, but not in another, like clean energy. Knowing how a company is sustainable enables you to see if it aligns with your goals.
Many companies, especially public companies, offer a vast amount of information related to their green initiatives. Even if an organization isn’t listing ESG attributes as a selling point, reviewing their prospectus or annual report can help identify business practices.
However, it’s more likely that a company will publish a sustainability report or provide information on its planet positive programs.
3. Consider Local or Startup Investments
Not every sustainable investment is in an ESG mutual fund. You may want to consider local startups or businesses that align with ESG values. A new organic restaurant or an education program are great examples of local programs that can make a big impact—and potentially drive revenue.
Startups can be easier to find. Green startups looking for funding may post on several funding websites, including general sites like GoFundMe, or investment-specific marketplaces like WeFunder or We Founder Circle.
4. Use Green Business Directories
There are online green business directories that make it easier to verify or find sustainable organizations. These can be global, such as the Global Green Directory. They can also be local, to the point that they are state-based, like California’s Greenbiz Tracker, or city-specific, such as Stillwater, Minnesota’s Green Business Directory.
These business directories are useful in that the list is already vetted. You only need to find which businesses may be investment opportunities.
5. Balance Returns and Fees
When investing in traditional assets, such as mutual funds or ETFs, investors must pay additional attention to fees. A sustainable fund may have higher associated fees. For example, the average ESG U.S. stock ETF has a 0.17% expense ratio, 0.05 points more than other ETFs. Even a small increase in fees can significantly affect expected returns.
Therefore, it’s important to calculate both the expected return and associated fees to ensure that an investment is viable for your financial goals.
6. Tap into Green Communities
One of the easiest ways to leverage new investment opportunities is to join green communities. There are various types out there, but it’s helpful to be surrounded by sustainable businesses, customers, and other investors. These communities provide industry and market insights, making it easier to determine what investments may be worth it.
Learn More about Sustainable Investing
These 6 tips offer new and experienced investors methods for narrowing their search while widening potential sustainable investing options. Often, the easiest way to get started is to meet with and learn from other climate-conscious individuals.
Wallet Max makes it easy to learn more about green investing and business practices.
Or you can discover more investing opportunities today and join our virtual Wallet Max Hub.