Investing with Integrity
By Bella Hillyer
Individual actions that benefit the environment are commonly characterized by tangible steps, such as taking shorter showers, forgoing single use plastic, or participating in a beach cleanup. But have you ever considered investing as a vehicle to create positive environmental change? Traditionally, the purpose of buying securities such as stocks, bonds, and mutual funds is to increase one’s wealth over time. Specifically, when investors purchase stock, they receive a stake of ownership in a company with the goal of it appreciating in value. Purchasing a certain amount of a company now may double your investment in the future. Mutual funds and exchange-traded funds (ETFs) are collections of fractions of shares from up to 500 companies so one can diversify the companies they invest in to help manage risk. Historically, stocks are bought based on one’s hope that a company will grow and be worth more over time, but now a number of socially responsible investment funds (SRIs) are prospering. According to the Global Sustainable Investment Alliance, Environmental, Social, and Governmental (ESG) investing grew to 30 trillion dollars in 2018. The purpose of SRI or ESG investment funds is to obtain both a financial return and promote beneficial social and environmental impacts.
SRIs are mutual funds that invest in companies with exceptional environmental and social responsibility practices. These companies are screened against environmental and ethical criteria to ensure individuals are making a positive impact with their investments. The social criteria include fair labor, product safety, human health, and diversity. For example, businesses that sell firearms, tobacco, alcohol, and fast food do not meet the ethical standards for SRIs. Companies that demonstrate high environmental responsibility performance are not water or energy intensive, do not release significant emissions and toxins into the air, support biodiversity, dispose of as little waste as possible, and source ingredients sustainably. Needless to say, fossil fuel giants like Shell and mass-plastic producers like Coca-Cola do not make the cut. Investing in an environmentally, socially, and governmentally responsible company does more than just increase one’s financial assets. Putting money into these companies helps them grow, and in turn helps them achieve their environmental and social goals.
So, how can you get involved in socially responsible investing, building your assets and helping finance a company with values you support? Here are some of my favorite Socially Responsible Investment Funds:
The goal of Humankind US Stock ETF (HKND) is to invest in the future of humanity. Its top ten holdings include technology companies such as Apple and Google and healthcare companies like Procter & Gamble and Pfizer. Humankind acknowledges that these companies can do better in terms of carbon emissions and harvesting of consumer data, but their benefits to humanity, including free access to internet searches and vaccines, earn them a spot in their ETF portfolio.
iShares Global Clean Energy ETF (ICLN) consists of thirty international companies focused on renewable energy initiatives. The top holding company is Plug Power Inc, which develops hydrogen fuel cell systems to replace conventional batteries. Another company in the top five is Enphase Energy. Enphase Energy is revolutionizing the solar industry with its micro inverter technology, which converts sunlight into a reliable energy source and works with almost every solar panel on the market. Even better, in 2020, ICLN demonstrated a 120% return on investment. ICLN embodies the purpose of ESG investing; stakeholders receive financial benefits while putting their money towards environmental innovation.
Socially Responsible Investment funds include the environment and its people as stakeholders. Instead of strictly generating monetary returns, investing in SRIs simultaneously invests in humans and the planet. For environmentally conscious individuals who also desire to build their personal wealth, socially responsible investing is a great way to increase one’s financial prowess while helping the environment.