Green investing is the practice of investing in companies that are producing “green” technologies that are good for the environment or that recycle and employ other environmentally responsible activities. A person who is interested in socially responsible investing has the opportunity to support companies that practice energy efficiency, that construct green buildings, produce less waste, and use recycled materials in their manufacturing or shipping processes. Companies that employ practices such as green purchasing, which means buying products that have limited environmental impact, and green chemistry, which means it doesn't use any chemicals that have an adverse impact on the environment, make a company attractive for green investing. Some popular green technologies include solar, wind, and biodiesel.
There are various vehicles for green investing. The green investor can buy stock in an individual company, or he can buy green mutual funds, exchange-traded funds, or bonds. Each of these investment vehicles has pros and cons, and it is recommended that the prospective investor seek the counsel of a professional financial adviser to see which investment or combination of investments will create the most profitable green portfolio.
A mutual fund is a group of investments which may include stocks, bonds, and other assets overseen by a manager whose goal is to make the most money for the investors. An exchange-traded fund can be diversified like a mutual fund, but is traded like stock. The advantage of mutual funds and exchange-traded funds are the diversification they offer the investor. It is possible for an investor to buy as little as one share of exchange-traded funds, which can also be purchased on margin.
Green bonds provide capital for companies that are developing environmentally friendly technologies or employing green practices. Bonds retain their value and pay a guaranteed rate of interest. Any interest earned on government bonds is tax-free.
The person who is concerned about the environment and wants to invest only in companies that share the same concerns has numerous choices and isn't limited to solar and wind power. Organic foods, electric vehicles, geothermal power, clean water, and biofuels are just a few of the many green investing opportunities. Additionally, there are numerous environmental practices a company can employ to become a good choice for green investing. Recycling water, metals, paper, and glass; eliminating hazardous waste from the manufacturing process; and other eco-friendly activities are sustainable practices that can ultimately lead to a cleaner environment.