Are green investments really making a difference? Anyone who chooses to invest their money in companies focused on sustainability and environmental protection wants to know the answer to this question. Investing can be complicated, and green investing is no exception.
Here is a closer look at the subject.
What is Green Investing?
Green investing is the practice of investing in companies that are engaged in environmentally conscious business practices. This can include forms of alternative energy, conservation of natural resources, pollution reduction, or any other form of environmentally friendly practice.
Green investing can take the form of individual stocks, corporate bonds, or ETFs geared towards investing in green companies.
What is Green?
This is where many investors can fall into a trap. What makes a company green? Sometimes this question can be answered straightforwardly. A company solely producing a product or service that reduces pollution could be considered green. But what about companies that offer other products or services alongside a green division? Are they green? Is a mining company mining for lithium green because lithium is used in electric car batteries?
As you can see the waters get muddied rather quickly. Many investors will have to decide for themselves if a company or a fund is green and aligns with their goals and beliefs.
Traps to Lookout for
One of the most common traps that green investors fall into is greenwashing. This is the practice of overstating a product or service to make it appear more environmentally friendly than it is.
Companies can overstate their use of recycled materials or use carbon credits as a way to offset pollution. It may be difficult for the average investor to uncover the truth of a company’s actual business practices.
Another common issue with green companies is that many of them tend to be startups. They have a lot of debt and little to no profit. This makes them risky investments by nature. There is a chance that you could lose all the money that you invest.
Are Green Investments Really Making a Difference?
This is a hard question to answer. The economy has a lot of moving parts. It can be difficult to know how much of an impact any one company or product can have. But that shouldn’t discourage you from investing in green companies.
Before investing just know what you are investing in. You shouldn’t invest in anything that you don’t fully understand. Do your research to make sure what you want to invest in is truly green and aligns with your goals and beliefs. Green companies can be profitable if you know where to look.
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Based in the Pittsburgh, PA area, Brian holds full-time employment as a Warehouse Manager for an electronics firm. Brian enjoys wealth building, investing, gardening and the great outdoors. Brian holds a B.A. in Environmental Studies from the University of Pittsburgh and an MBA from Robert Morris University.
