For far too long, investment has been viewed through the lens of maximizing profits. But that’s historically come at the expense of the well-being of our planet, as manmade climate change through fossil fuels and other pollutants have inextricably linked production with environmental harm.
To that end, sustainable or green investments have come into stark focus for a lot of people. For the past couple of decades, more and more money has been flowing to projects and companies that are actively trying to reverse some of that environmental damage.
Despite all of the challenges that 2020 brought with the pandemic, sustainability remains one of the biggest themes for investment in 2021. The pandemic has given people an opportunity to sit and take stock of how responsibly they want to spend their money — we’ve got some tips for how you might be able to invest your money in ways that do the planet some good.
Should companies be on the hook for repairing the environment?
Increasingly, people expect companies to take steps that will help minimize this environmental damage; younger investors, in particular, show a growing interest in green investments. They’re willing to look beyond the misconception that green investments will yield lower returns.
However, there’s plenty of evidence to the contrary. A report by investment manager Fidelity shows that stocks with higher ESG or environmental, social, and governance ratings outperformed stocks with lower ESG ratings between January and September 2020.
There’s also research that suggests that the ethical performance of companies can prove to be an indicator of their financial performance in the future. A study conducted in 2019 revealed that an investment strategy based on ESG metrics alone could predict higher returns.
The investment industry is becoming more aware of this monumental shift, as more and more investment firms across the globe are planning to increase the ESG assets they manage within the next few years.
Armed with this knowledge that green investments are the way to go, here are a few options that you can consider as you change up your portfolio in 2021.
Sustainable power generation
One of the primary ways to save the environment is to increase our reliance on sustainable power production.
For generations, we have relied on fossil fuels to produce the electricity we need for society to run. As technology and industrialization boomed, so did our energy requirements. This meant that we were burning up more coal and fuels than ever before, harming the environment at an alarming rate.
To minimize the damage, we require a massive global transition from fossil fuel to clean energy, which involves trillions of dollars in investment. While a complete global shift to renewable energy is going to take decades, it’s going to provide many opportunities for investors to earn bumper returns on their funds.
Several large renewable energy companies are listed on the New York Stock Exchange. Some of them operate a global multi-technology platform, in that they utilize multiple sources of renewable energy in their facilities. This includes solar, wind, and hydroelectric.
Other companies specialize in marine power solutions, which use advanced tech to convert ocean wave energy into electricity. It’s a sophisticated process that involves the integration of several systems for the extraction of natural energy from ocean waves.
Solar panel manufacturers
Even among green investments, diversification is key to a well-rounded investment strategy. So look beyond sustainable power generation companies to find investment opportunities. For many, solar panel manufacturers represent a good option.
It makes sense after all. Solar energy is one of the fastest-growing renewable energy methods across the globe. Countries have even come up with plans to power their entire grid based on nothing but solar panels alone.
What that means is that there’s going to be a sustained increase in the demand for solar panels. Since the barrier of entry is considerably lower, many homeowners are now increasingly making the shift to solar energy.
Solar panel manufacturers will continue churning out panels to meet this demand. There’s also a lot of room for innovation in this particular category. Some companies are pioneering technology to develop thin-film solar panels. They are capable of producing electricity at a much lower cost per watt compared to conventional silicon-based panels.
This suggests that the industry has a lot of room to grow. Strategic investments in such companies have the potential to pay off in the long run as the solar revolution picks up pace across the globe.
Green banking should also be on your radar
More and more voices are now calling for banks to be held accountable, as the money they lend to corporations is used in projects that actively harm the environment. This has created space in the banking industry for a green banking revolution.
A few banks and banking service providers are now making a firm commitment to green banking. This goes beyond reducing the use of paper or running the entire operation on sustainable energy.
Green banking mandates that the banks must not lend money to businesses that do not have the good of the planet at the heart of everything that they do. This also gives customers the peace of mind that the funds they deposit with the bank are not going to projects that harm the environment.
How Aspiration is leading the green banking revolution
Some of you might be surprised to find out that the four biggest banks in the United States lend more than $240 billion every year out of their customers’ deposits to fossil fuel projects.
Aspiration is against that.
Aspiration is a neobank that’s 100% committed to clean money; not a single penny from customer deposits is used to fund fossil fuel projects.
It also actively incentivizes customers to do their bit for the planet — every time customers swipe their debit card, Aspiration plans a tree and also provides them with the opportunity to contribute towards the same. They also work with leading reforestation partners across the globe for this good cause.
Aspiration can also help you meet your green investment objectives through the Aspiration Redwood Fund. The fund conducts a thorough analysis of companies’ sustainable environmental, workplace, and governance practices to provide you with an investment avenue that’s in line with your social values.
The companies that make up this fund are evaluated on a series of ESG factors. They’re committed to the betterment of the planet and believe that to be their long-term mission. The sustainable businesses that form the Redwood Fund are leaders in industries as diverse as information technology, energy, healthcare, and others.
Aspiration is of the view that sustainable investing should be accessible to all, not just the few who can afford to work with giant investment firms. That’s why the Redwood Fund has a minimum investment of $10; that’s enough for anyone to start their green investment journey.
Start today by opening an account with Aspiration.