Green investing is an increasingly popular philosophy that promotes investment toward environment-friendly companies or initiatives. Two investors might define a green company differently, but this mostly includes companies engaged in solving environmental problems (such as the development of renewable energy) or conducting business in an ecologically conscious way.
This type of investing is deemed an offshoot of socially conscious investing, although neither of them implies investments that are safer than a market index such as the S&P 500. Investing in “green” firms can actually be riskier than other equity strategies, as many entities in this landscape are in the development phase, with low revenues and high earnings valuations. Still, if investors consider environmental protection via encouraging these eco-friendly businesses, then green investing can remain attractive and feasible.
Some options for building a green portfolio include the following:
Individual stocks allow investors to funnel their dollars to a number of companies that meet their “green” criteria.
Mutual funds and exchange-traded funds (EFTs)
This is investing in a pool of securities to offer average investors an affordable method for diversifying across multiple sectors.
A fairly new part of green investing, green bonds produce funds for environmentally friendly ventures. This fixed-income vehicle, when offered by governments to fund green programs, may provide tax-exempt income.
Gregory Lindae is a veteran in the investment industry with over 20 years in service and has worked with companies such as Blackrock, Salomon Brothers, and FMO. Learn more about green investing this blog.