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Socially Responsible, Carbon-Aware and Other Investment Types Without a Bad Taste in Your Mouth

Estimated reading time: 5 mins

When you want to invest in a socially responsible way, skipping companies that aren’t carbon-aware or only picking environmentally conscious energy companies, then it takes a bit more work. Fortunately, due to the increasing interest from millennial investors, the number of environmentally friendly funds is increasing at a rapid pace giving us all more choice than ever before to invest with our heart, not just our savings balance.

Here are a few ways to invest sensibly in this new era.

Socially Responsible Investing

Socially responsible investing is often what green investments are referred to. For instance, with Wealth Simple, they focus on companies that only release low carbon emissions, score well on gender diversity, and at least a few that put effort into affordable housing too.

In 2014 alone, investments that were socially responsible grabbed $7 trillion which was over 70% higher than the previous year. With over $22 trillion put into socially responsible investments today, there’s is a growing trend to buy companies that care more about the environment and generally feel good to invest in. Some estimates suggest a leap up to $50 trillion in investment within the next five years.

For the latest crop of investors – millennials – they care far more about the environment than previous generations. Over a third of millennials give due consideration to socially responsible factors before picking an investment. Popular investment magazines like Kiplinger increasingly feature articles to appeal to this new set of investors with titles like, “7 Great Socially Responsible Mutual Funds” to attract younger readers. After all, retirement-age investors will be gradually divesting their investments, not buying new ones, so magazines like Kiplinger and Fortune must focus on appealing to a younger, green-savvy audience to find their readers of tomorrow.

Carbon-Aware Infrastructure Investing

Infrastructure investments are going through something of an overhaul at present. It’s no longer satisfactory to many investors to buy into infrastructure funds which acquire shares in companies that profit from building dams, roads, and toll booths if they’re not doing something towards the environment. That usually means being at least carbon aware and often, carbon neutral.

The amount of energy used in the form of electricity, natural gas, and gasoline while completing some of these infrastructure projects is alarming to many. Therefore, infrastructure companies (and funds) that pay attention to carbon emissions have become a hot topic amongst younger investors. They don’t want to be profiting off companies that are depleting the ozone more or creating greater air pollution in the downtown areas. It just doesn’t feel right. Gaining that 1-2% extra per year in returns isn’t enough compensation. Just like how millennials focus on work-life balance rather than maximizing hours and pay, they also want a good feeling about their investments too.

Because of this, infrastructure funds are changing. Websites like Fossil Free Funds examine US mutual funds and ETFs to see which fund managers are buying into companies that deal with fossil fuels and which do not. The American Funds New Economy Fund puts money into companies promoting new technology in a global economy. Another fund, SPDR S.&P. 500 Fossil Fuel Reserves Free E.T.F. allows investors to buy into the S&P 500 index, but without certain energy companies. The iShares MSCI ACWI Low Carbon Target ETF from Blackrock is another example of this trend.

Biological Growth from Timberland is a Feel-Good Investment

Timberland is an interesting investment. While the returns on the standing timber just about keep up with US inflation, historically the land value has risen reasonably well. The pine and spruce species that grow well in the US produce around 7 percent of biological growth annually. This means every tree in the forest grows a bit taller, stronger and sometimes wider too.

Modern forestry owners focus on sustainable forestry practices. The idea is that they only cut down trees that are impacting the potential growth of adjacent ones. They may fell a tree that’s suffering or dying off and cannot be saved. For every older tree that they cut down, they plant several more young, healthy trees in its place. Also, they have active greenhouses where a nursery of young saplings is grown under heated lamps until each one is ready to be re-planted as a new tree out in the forest. The forests are managed in an ecologically-friendly manner, so they can continue to flourish for decades to come.

These types of timberland companies want their forests to positively impact the nearby community. The forests provide an attractive site for local people and clean the air of pollutants. These companies also offer local employment to loggers and other workers in remote communities. One such company is Weyerhaeuser which focuses on sustainable forestry management (they own over 12 million acres in the US) and produce wood products. The corporation has won awards for being an ethical company and they just raised their dividend again too.

Energy Investing in Good & Bad Times

Energy investing is a practical one where you can choose which companies you wish to invest in and those you want to skip. Just like in other industries, some companies focus on being environmentally friendly in their daily practices and these are worth considering closely.

Knowing what companies are behaving well and present a good investment opportunity isn’t easy to determine. Dedicated analysts looking at the total energy market like Dr Kent Moors do the heavy lifting for us to find the professional energy companies that are worth looking at. He also helps readers of his investment newsletter understand what to look for and what ideas are not worth pursuing. By being a long-term reader, it’s possible to educate yourself well enough to select energy companies that you’d feel happy putting your money into for the long term.

Whatever type of investment you like, it’s possible to find green ones that will let you sleep well at night. Then the profits and regular cashflow in the form of dividends are just a nice extra bonus to have.

 

About the author /


Simon is a creative and passionate business leader dedicated to having fun in the pursuit of high performance and personal development. He is co-founder of Applied Change, a Business Change consultancy based in the UK. Simon is also an Ambassador for Gloucestershire business. Simon is an Associate Member of the Chartered Institute of Professional Development.

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