Quick guide to make your investments greener
Your Guide to Sustainability: The Basics
17 october '22
Reading time: 6 minutes
The way we spend and invest our money can massively impact the environment. Let’s have a look at greener ways to invest in 2022.
Words by Rebecca Pollard
Picture by Cottonbro
Being sustainable in this day and age is not just about making environmentally-conscious decisions in how we live, but also in how we spend and invest our money. As we know, small steps taken together in sustainability have great impacts for our world, which is why in 2022 financial sustainability is not only a hot topic, but a heavily important one.
Green spending and greener investments
When we talk about green spending, we mean making small adjustments to your usual spending habits by keeping its environmental and social impact in mind. This can be done by quite simply choosing to buy local, by choosing environmentally and ethically responsible retailers, and opting for public transport or carpooling to decrease your carbon footprint. Did you know that this same ethos can be simply applied to your investments?
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The in’s and out’s of sustainable investment
Traditional investing delivers value by translating investor capital into investment opportunities that carry risks commensurate with expected returns. Sustainable investing balances traditional investing with environmental, social, and governance-related (ESG) insights to improve long-term outcomes. While seeing a return on investments made is always an investor’s main priority, sustainable investment seeks to shift the ethics involved; from a monetary return to an environmental return, and in most cases both. But what does this mean for the average consumer that wants to make their finances more sustainable?
That’s easy. The most important thing is to make more conscious decisions about where to put your money.
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Our guide to sustainable investing
1. Know your values
Think about the impact you want to make and causes you think are worth investing in.
Take some time to read into a company’s mission, do not simply take their word when they claim to be sustainable. Also, it is important that their mission aligns with your values and expectations.
3. Returns with impact
Just because you are investing sustainably, doesn’t mean you should expect lower returns. Always look for information on the company’s website that will show both their financial and eco-impact over long periods of time.
Picture by Andrea Piacquadio
Other factors to take into consideration when making greener investments
Eliminate fossil fuel investments
An investment in finite resources such as this is still widespread. However, through funds, bonds, and pensions schemes you might be unknowingly investing in the world’s most environmentally harmful industry: fossil fuels. A little bit of extra research when investing will ensure that this won’t happen.
Try investing in EFT’s
These are exchange-traded funds that track and follow stock indices. By investing in these you have the opportunity to invest greener in a way that costs less and has a smoother investment process. You also have the opportunity to choose between EFT’s (that uses exclusionary criteria like exclusion of sectors like weapons or fossil fuels), SRI’s (socially responsible investing that is concerned with human rights or environmental impact), and impact (investors that are concerned with sustainability and that will only buy stocks from environmentally conscious companies).
Switch to a sustainable bank
Switching to a sustainable bank allows that your money is being put to worthy environmental and social causes, and not pumped into environmentally harmful industries. Sustainable banks such as Triodos Bank or Banca Etica carry out business with transparency so that investors can see all the details of the organisations they finance so that they can ensure their money is going to notable causes.
Turn to green bonds
Green bonds are an innovative and sustainable way to save your money. In theory, it is like a regular savings bond that uses savers cash to fund green projects such as, renewable energy, energy efficiency, clean transportation, and waste management. All cash is promised back to the holder of the bond with added interest, as well as that, the holder knows that their investments have had a positive impact on the environment. Green bonds may come with tax incentives such as tax exemption and tax credits, making them a more attractive investment vs. a comparable taxable bond. These tax advantages provide a monetary incentive to tackle prominent social issues such as climate change and a movement toward renewable sources of energy. The World Bank is a major issuer of green bonds and issued $14.4 billion of green bonds from 2008 through 2020. These funds have been used to support 111 projects around the world, largely in renewable energy and efficiency (33%), clean transportation (27%), and agriculture and land use (15%). These figures show just how impactful green bonds can be.