Many considerations go into designing a portfolio you are comfortable with. Asset allocations, diversification, appetite for risk and, increasingly, the environmental impact of the stocks, bonds and other financial instruments you hold. If you are interested in making your portfolio greener, below are some of the ways you can go about doing that, both directly and indirectly.
A good way to start with a greener foundation when building your portfolio is to shop around for banks that take green investing and CSR seriously. If you are thinking about opening a brokerage account and storing your assets with a particular bank, do some research into the kind of investing the bank itself does before giving them your money.
Many investors would be surprised how much of an outsized impact they can have on the world simply by choosing to bank with more environmentally conscious financial institutions. Even if you believe your small portfolio and/or savings are insignificant, supporting the operations of a bank that is committed to doing more good than harm to our biosphere can help make a large difference.
Invest in Green Energy
There are a couple of ways you can invest in green energy. You can invest in large renewable energy companies directly by purchasing stock in businesses like Canadian Solar, SunPower Corp, Vestas Wind Systems A/S and others. Or you can put your money into things like green index funds, mutual funds and ETFs. Clean energy is predicted to be an important theme in exchange-traded funds throughout 2021 and beyond.
Stay Away From Crypto
You can also help keep your portfolio green this year by staying away from cryptocurrencies, in light of the massive amounts of energy that are required to mine them. Cryptocurrencies like Bitcoin have been criticized since the beginning for the carbon footprint involved in the mining process. While the technology is changing, for the time being, the business model for mining cryptocurrencies, and therefore what buyers and sellers of these assets tacitly endorse, even if they are not directly involved in the mining, is based on using the cheapest sources of energy possible to mine coins.
In addition to directly and indirectly investing in companies that are trying to make the world a more environmentally sustainable place and reducing ecologically harmful practices, you can also green your portfolio by divesting (directly and indirectly) from companies that destroy the natural world. Obvious divestments would include major fossil fuel companies, mining companies with poor track records, companies that invest in or support coal power, and any other companies that do a tremendous amount of damage and care little when it comes to environmental consciousness and care.
What you choose not to invest in says as much about your commitment to green investing as what you do put your capital into. Bear in mind that there are some who believe the divestment-investment dichotomy is not the right way to put pressure on companies and governments to change the fossil fuel paradigm, but rather suggest a third option: engagement. Engagement involves continuing to invest in these companies, in recognition of their potential to make a positive impact, while engaging with them publicly and through ownership stakes.
It is entirely possible to use your capital for good when investing while also seeking out ROI. More and more, the investing public and the scientific community are realizing that to do things like combat climate change, reverse deforestation and save our coral reefs, we need the private sector. These companies require capital to fund their operations, and you, as an investor, can feel good about a green portfolio that makes you money and helps capitalize enterprises that are not just profit-seeking above all else.