Sustainable investing: green, greener, greenest
Yes, we are happy to share with you the very first article by Lies on ELFIN! Lies will regularly highlight interesting investment topics from now on. Her first article is about different shades of SRI.
“Hi, I’m Lies! My passion for investing and financial independence started about 5 years ago when the book “Rich Dad Poor Dad” by Robert Kiyosaki came my way. Never before had I thought about the fact that money, which you have worked hard for, can work for you afterwards. Not by spending it on yet another coffee to go, but by investing it! In my work at VanEck and from my own experience, I have learned a thing or two about wealth accumulation and investing. I give the beginning investor tips & tricks on ETFs and thematic investing. Among others through my Instagram channel, and so now through ELFIN.”
Your money to ‘good’ companies
You have made the choice to start investing or you are already investing. Good for you! Only you don’t want your money to go to the lesser companies in this world. But how do you know if you are investing sustainably? I hear this call for clarification more and more often. Fortunately, in the investment world you can now measure sustainability along a bar that runs from light green to dark green.
Shades of Green
Light green ~ The first step in the right direction is exclusion. In this process, a lot of trouble is filtered out of a mutual fund or ETF. These woes fall under the heading of socially undesirable activities. So you don’t want to invest in the gun, gambling or tobacco industries? Then this is the way to go. The best way to get started with SRI is to look for a well-diversified ETF that filters out these industries.
Greener ~ Going a step further, you can invest in companies that are demonstrably making a difference on the topics of Environment, Social and Governance, also called the ESG criteria. So instead of exclusion, there is inclusion. In this process, an investment institution looks precisely for companies that score high on these ESG criteria. These are companies that, for example, make environmentally friendly products, healthy food products or are in the recycling industry.
Even greener ~ It doesn’t stop here! Because you can think of these ESG criteria as a guided scale. The higher companies score, the more sustainable they are. An investment vehicle or ETF can use these criteria to select even more sustainable companies for you, or you can research these yourself. I would say, take the bold step and explore!
Dark green ~ If you take it all the way to the tip of the scale, you end up with dark, darker, darkest. This is the place to be if you really want to make a positive change with your dough. At this end of the spectrum, people are quick to talk about impact investing. Of course, the stock or ETF here scores high on the ESG criteria mentioned above. But that alone is not enough. Here are the companies with the primary goal of pursuing social change in the areas of society and the environment. Investing in the dark green category, by the way, can be done simply in conjunction with a profit motive. Because hey, after all, we want to see a return on investment .
Psst: in the Starting to Invest e-course you will not only learn the ins & outs of investing, but you will also find a comprehensive module on sustainable investing. Includes a handy list of SRI ETFs. Click here to take this course and start investing sustainably as well.
