With how global warming is affecting the earth, green investing has become a popular choice for investors. Similar to other types of investment, investors need to conduct thorough research before actually jumping into green investing. Though the clean-cut to define a green investment itself is still blur, this can still be one of the promising choices for investment.
Green investing, an initiative for a better world
Investopedia mentions the term “green” most of the time closely relates to activities that positively influence the environment directly or indirectly. Hence, green investing is an investment in nature sustainability and conservation-focused companies. Investopedia further elaborates on the characteristics of green companies as those which are aware of alternative energy sources, maintaining clean air and water, and other environmentally conscious practices in implementing their business.
Green investment mostly derives its revenues and profits from environmentally friendly “green” activities. Sometimes, green investment also applies to subsidiary businesses with a more sustainable approach to business implementation and production. Subsequently, a more committed approach, the pure-play green investments, only generate revenues and profits from green activities.
Diving deeper into green investing
The must-have assets for investors who are interested in a green portfolio are securities, mutual funds, ETFs, and bonds. Investopedia lists green mutual funds with the TIAA-CREF Social Choice Equity Fund (TICRX); Portfolio 21 Global Equity Fund Class R (PORTX); and the Green Century Balanced Fund (GCBLX). Governments occasionally offer green bonds and to further accumulate revenue for funding projects or businesses.
Sometimes, the green is grey
What makes a green investment “green” is sometimes also grey. While some investors focus on how “green” the outcome products of certain companies, some others are paying more attention to how the companies practice sustainability in their overall business.
One perfect example of such a case mentioned by Investopedia is oil companies. As much as oil companies try to maintain sustainability in their practice, burning fossil fuels, in its essence, is still one of the main contributors to global warming.
More dilemmas come with emerging false green companies. Some businesses label themselves as green for a mere branding purpose without actually following environmental conscious acts. Investors who take interest in green investment should research thoroughly before making their decision on an investment.
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