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What Is Green Investing?

Green investing is a way to help investors reach their financial goals while investing in companies that support eco-friendly values. If your personal values include keeping the Earth healthy for future generations, then green investing is a way to align your value system with your financial goals.

When you invest in “green” options, your investment dollars will work to support organizations that are pro-environment and sustainable. It is a win for the environment and for your personal wealth!

How Does Green Investing Work?

Green investing is where investors back businesses that are environmentally conscious. The companies or organizations they invest in might have green policies that are built into their daily operation, develop renewable energy sources, work to educate the public about green initiatives, or other eco-friendly focuses.

What Is a Green Investment?

Green investing is just one way that investors can utilize their funds to improve their wealth in a socially responsible way. In short, these types of projects and companies are committed to alternative energy sources, clean air and water projects, or eco-conscious business practices.

Why Is Green Investing Important?

Green investing is important for many reasons. First and foremost, it is aligning your investing activities with a green future. It is a way that investors can make an impact while helping the planet. And unlike giving a donation, investors who fund green initiatives can see their money grow while they better the planet.

Green investing is a subcategory of a larger investment strategy called socially responsible investing (SRI). Within this investment strategy, investors utilize their capital to support companies that line up with their own individual belief system. It is also commonly called impact investing.

How To Do Green Investing

If you are interested in green investing, there are numerous ways you can get started. Before you begin, you should make sure that the investments you are choosing align with your personal values.

Green Mutual Funds

As an investor, it can sometimes seem overwhelming to pick multiple stocks from a variety of companies. Investing in a green mutual fund will immediately diversify your portfolio with eco-conscious companies and save you the trouble of having to invest in each company individually.

Examples of Green Mutual Funds

TIAA-CREF Social Choice Equity Fund (TICRX): This fund invests at least 80% of its assets in stocks – all of which give special consideration to environmental, social, and governance criteria. It attempts to achieve the return on the U.S. stock market utilizing the Russell 3000 Index as its benchmark. The top holdings include Microsoft Corporation (MSFT) and Tesla Inc (TSLA).

Portfolio 21 Global Equity Fund Class R (PORTX): This fund invests in both domestic and international markets, including emerging markets. This allows the fund managers to not be constrained by geographies. The top holdings within the fund include Apple (AAPL) and PayPal Holdings (PYPL). It should be noted that the fund’s expense ratio is 1.3% which is a bit high.

Green Century Balanced Fund (GCBLX): This fund keeps your money out of fossil fuel companies and instead invests in sustainable companies. It typically holds 25% to 40% in bonds and the remaining 60% to 75% in stocks. The top holdings within the fund include Apple (AAPL) and Microsoft Corporation (MSFT).

Green ETFs

A green ETF is an exchange traded fund that focuses on investing in clean energy and sustainability.

Examples of Green ETFs

Nasdaq Clean Edge Green Energy Index Fund (QCLN): This ETF has a mix of stocks that include lithium batteries, home solar panel providers, and even has electric vehicle stock like Tesla Inc (TSLA) included. Over the last year it has surged more than 280%, likely because the U.S. is becoming more serious on climate change.

ALPS Clean Energy ETF (ACES): A slightly smaller ETF than Nasdaq Clean Edge Green Energy Index Fund, ALPS Clean Energy ETF only increased 200% last year – which is still nothing to sneeze about. This ETF has holdings in a wider definition of alternative energy including a semiconductor company that focuses on efficient LED technology and a hydrogen fuel cell company. This fund likely has names you might not consider or find on your own.

IShares Global Clean Energy ETF (ICLN): This fund was established in 2008 and holds a variety of clean energy stocks. Within it you will find hydrogen fuel cell companies and electric utilities. It provides a great mix of renewable energy around the globe. 

Energy Stocks

Our homes, offices, and businesses all require energy to power our lights, HVAC, electronics, and even vehicles. Moreover, clean energy is the future of energy, and a great option to invest in.

Examples of Green Stocks

NextEra Energy (NEE): This company is the leader in clean energy. It owns Florida Power & Light, which to date is the largest electric utility that is rate-regulated in the U.S. serving more than 11 million residents.

Enphase Energy (ENPH): This global company is the leading supplier of energy technology including the micro-inverter based solar plus storage systems. Its intelligent platform delivers user-friendly solutions to connect energy management, solar generation, and storage.

General Motors (GM): In January 2021, General Motors set a goal for its cars, SUVs, and light pickup trucks to have zero emissions by 2035. This shift away from gasoline makes GM a greener energy leader in the vehicle industry.

SunRun (RUN): This San Francisco based company provides solar panels and home batteries to residential properties throughout the United States. Its potential continues to expand if Congress passes subsidies for consumers to install solar panels on their rooftops.

Water Stocks

Water is one of the most vital natural resources. But there is fear that due to climate change the world will run out of fresh water. Water stocks are companies that collect, purify, and distribute water.

Examples of Water Stocks

York Water Co (YORW): York Water Co provides nearly 20 million gallons of water daily to 71,000 commercial, industrial, and residential clients in Pennsylvania.

California Water Service Group (CWT): This company provides water-related utility services including purchasing, storage, testing, treatment, and distribution of water for domestic, public industrial, and irrigation uses.

Essential Utilities (WTRG): This 135-year-old company has been publicly traded for over 50 years. The continued growth of the company has allowed it to continue to provide reliable and safe water to its large customer base.

American States Water Co (AWR): American States Water Co is a California based company that provides both water and electric services to several mountain communities. 

Green Bonds

This fixed income investment is designed to raise money for projects that focus on the environment and the climate. They typically finance projects that are aimed at pollution prevention, energy efficiency, sustainable agriculture, clean water, sustainable water management, and other green solutions.

Examples of Green Bonds

IShares Global Green Bond (BGRN): This Bond ETF holds 192 green bonds with an average maturity of 7.92 years. The bonds are tied to investments that promote environment and climate sustainability.

VanEck Vectors Green Bond (GRNB): VanEck Vectors Green Bond ETF is the first ETF offering exposure to green bonds. In addition, it allows investors to integrate sustainability into their portfolios while having a positive impact on the environment.

TIAA-CREF Green Bond (TGROX): This fund has actively managed green bonds that have a direct and measurable environmental impact. It invests in U.S.-dollar fixed income markets.

Why You Should Consider Investing Green

Future generations depend on what we do now. Moreover, investing green not only puts us on the path to provide a better life for our future grandchildren and great grandchildren, but it allows us to build wealth to protect our own future as well.

Green Investments Are Great Investments

Green investments are not a one-size-fits-all. In fact, they are highly personal based on your unique values and goals. You can invest in stocks, mutual funds, bonds, and electronically traded funds that all focus on green solutions.

If you would like to find the best green investments to add to your portfolio, utilize your financial advisor. Therefore, they will provide insight on the investment vehicles that will help the planet while aligning with your personal financial goals.